Scope for more broad-based USD strength over the spring – Rabobank

The market is clearly pre-disposed towards holding an optimistic outlook on Federal Reserve rate cut prospects. Economists at Rabobank analyze its implications for the US Dollar (USD).

Market continues to recalibrate the pace and order of policy moves in the G10

Market implied policy rates indicate that the Fed is expected to cut rates by around 37 bps on a six-month view. This is more than is expected for most other G10 central banks.

We see scope for more broad-based USD strength over the spring as the market continues to recalibrate the pace and order of policy moves in the G10. 

It is clear that the process of calibrating the timing and pace of central bank policy moves this year still has some way to go. 

Given the relative resilience of the US economy compared with its peers and in consideration of the number of Fed rate cuts still priced in for this year, we see the USD as likely finding broad-based support as this process continues.