A 0.86% increase from the morning’s starting levels, the USD exchange rate fluctuated at $1.0466.
Exchange rates for US dollars (USD) tempered despite growing recession fears
Despite a surge in safe-haven flows brought on by protests in China as people rebel against the strict zero-Covid policy, the US Dollar (USD) struggled to find demand on Monday.
Along with their pessimistic predictions for many of the world’s economies, economists from Danske Bank predict that the US will have a recession in 2023. The Federal Reserve’s hawkish stance may be pushing the economy into a recession given the worsening economic outlook. Danske Bank projects that the US economy would fall by 0.2% in 2023 before gradually recovering by 0.5% in 2024 as long as inflation is too high.
The US economy is still on a path of modest growth as we head into the winter, supported by strong exports and resilient private consumption, even though macro momentum has clearly cooled in recent months.
We anticipate the Fed to proceed cautiously in finally softening its stance on monetary policy since risks are still skewed toward inflation pressures turning out to be more persistent than anticipated.
The “Greenback” has been under pressure as a result of expectations for more gradual interest rate increases, which followed last week’s meeting minutes from the Federal Open Market Committee (FOMC), which were comparatively dovish.
Exchange rates for the Euro (EUR) surged due to the US dollar’s negative correlation
However, alarming reports from China pose a danger to alter that.
However, hawkish remarks from European Central Bank (ECB) policymaker Klaas Knot helped the euro on Monday morning. Following Chief Economist Philip Lowe’s dovish remarks, which called for a monetary policy slowdown, Knot argued against it. Concerned that the government’s monetary authority is failing to ECB Lagarde to Support the Euro? USD Exchange Rate Forecast?
In the near future, when ECB President Christine Lagarde is scheduled to speak late on Monday, there might be changes in the exchange rate between the Euro and the US dollar. The pairing might change if the central bank gives any additional hints about how it plans to combat inflation.
If a dovish stance is maintained, two speeches by Fed members could cause the US Dollar to decline even further.
Knot believes that additional interest rate increases are required to combat inflation.
“Inflation is still my number one concern.” I believe the risk of us doing too little is obviously more pronounced than the risk of us doing too much as long as the risks to our inflation outlook are so clearly tilted to the upside.
In spite of market gloom and widespread protests in China, the EURUSD exchange rate increased as worries about the US recession took center stage.
As of this writing, the EUR
Dollars in Euros (EUR)