FX: The dollar has not reached a turning point

Kathy Jones, chief fixed-income strategist at Charles Schwab, said the dollar is likely to remain around its current level until the Federal Reserve starts signaling a shift from interest rate hikes to rate cuts.

Jones said, "It's hard to say the dollar has reached a turning point until the Federal Reserve actually signals a policy shift”。

Early this morning, the Federal Reserve interest rate decision as scheduled to raise interest rates by 25 basis points, Federal Reserve Chairperson Powell opened the door for further interest rate hikes at the subsequent press conference, and said that this year will not cut interest rates, but revealed that there are many votes in support of multiple interest rate cuts next year. However,This statement did not trigger a sharp decline in the US index, which closed down only 0.29% on Wednesday and remained above 101.

Although the U.S. economy remains resilient,Derivatives markets are priced to reflect expectations that the Fed will start cutting the federal base rate early next year as economic growth cools.

And Jones said, "We've already digested a mild recession.The latest data doesn't convince me that a recession won't happen. "

The dollar rallied strongly in 2022 on the support of the Federal Reserve's rate hikes, but has since retreated on expectations that the Fed is about to end its rate hikes. The Bloomberg Dollar Spot Index is down about 3% this year, whileEUR/USDUp more than 3%,GBP/USDUp about 7%.

Mr. Jones said the ECB could end its rate-hiking cycle "sooner than they like to admit" and it was unclear what the BoE would do. "This is one of the most unpredictable cycles I've seen in years", she said.

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