USD may have already adjusted down to reflect a modest rates outlook - AmpGFX

There is a risk that the USD remains soft through the rest of this year, because the market is still clinging to hopes that the Fed will hike again before year-end, according to Greg Gibbs, Analyst at Amplifying Global FX Capital Pty Ltd.  

Key Quotes

“However, there is also scope for the US economy to out-perform what appears to be low expectations for rate hikes over the medium term.  I wouldn’t be so cute to suggest that the USD is likely to fall over the rest of this year and rally next.  There are never clear answers.”

“The broader message is perhaps that rate expectations are relatively low over the medium term, consistent with the recent weakness in inflation, some more dovish Fed statements since June, and a shift to focus on balance sheet reduction.  The market appears to have taken on this view and the USD is weaker as a result.”