By eFXdata — Nov 03 - 11:00 AM
Societe Generale Research sees some room left for the long USD rally ahead of a trendless trading phase.
"Fed Chair Jay Powell pivoted from dove to hawk between the FOMC statement and press conference. The statement hinted at a slower pace of tightening but at the press conference, Mr. Powell warned ‘terminal’ rates are likely to be higher than previously thought, and the actual pace of increases is less important than the destination. The dollar benefited but we think that going forwards, growth expectations will be more important and less dollar-friendly," SocGen notes.
"So far, US rates have risen further and faster than elsewhere, on the back of economic out-performance. A fiscally fuelled reopening saw the US outperform and both geography (far from Kyiv) and being the world’s second-largest energy producer provided a cushion as others were hit by surging gas prices. But the drivers of economic out-performance are fading. That means we are close to the end of the dollar’s long rally and moving to a phase of trendless trading, which is likely to last for some time, before other economies’ economic prospects improve, at which point the dollar will start to fall back," SocGen adds.
Société Générale Research/Market Commentary