USD unlikely to strengthen significantly – Commerzbank

Atlanta Fed President Raphael Bostic remained optimistic that inflation will continue to cool this year and signaled the possibility of two rate cuts in the second half of 2024. However, economists at Commerzbank do not expect the US Dollar to strengthen. 

Little speaks in favor of rising inflation in the US

Atlanta Fed President Raphael Bostic said that ‘inflation has come down more than he expected’ and is on track to reach the 2% target. At the same time, he cautioned that it is too early to give the all-clear. Nevertheless, there is little to suggest that there will be any further upside surprises for the time being, at least as far as US inflation is concerned.

Despite the progress on inflation, he was still cautious and talked about the possibility of two rate cuts in the second half of the year. Fed Governor Michelle Bowman went a step further, saying that ‘it will eventually become appropriate to begin the process of lowering our policy rate’ if inflation continues to fall. And with all signs currently pointing to easing inflationary pressures, the market is already anticipating this. 

There is little to suggest that a significant correction in rate expectations is imminent and that the USD will strengthen significantly as a result.