The dollar edged lower and it could struggle to rise unless concerns resurface that U.S. interest rates are likely to remain higher for longer and rate-cut expectations are trimmed back again, UniCredit Research said.
“A return of market expectations towards a high-for-longer scenario in terms of U.S. policy rates is needed to provide the greenback with much more strength.”
Standard Chartered said sharp interest-rate cuts by the Federal Reserve would be negative for the dollar, but the currency could also fall on moderate easing.
“The dollar is likely to fall if weaker-than-expected activity and inflation lead the Fed to exercise its put. But the consensus soft landing also entails Fed policy rate cuts.”
Standard Chartered thinks the full-scale dollar strength of late 2021 and 2022 is unlikely to return as it was driven by the Fed’s no-compromise stance regarding tackling inflation.