As we approach the beginning of a new year, UBP’s Global Head of Forex Strategy Peter Kinsella gives us an overview of the key currency trends to look out for in the next phase of the cycle as inflation starts easing and monetary policy tightening peaks.
Key takeaways:
- The dollar is set to weaken modestly, reflecting such factors as waning inflation pressures, slowing interest rate hikes, the size of the US current account deficit, and stretched dollar valuations.
- As a result, emerging market currencies like the Brazilian real and the Mexican peso will benefit due to their high interest rate profiles.
- The euro’s and the pound’s trajectories will depend on energy prices.