2024-07-20 09:45:00 ET
Summary
- The consolidative phase for the dollar, after its recent drop, is evolving into a proper upside correction.
- Japan's economy appears to have recovered in Q2 from the contraction in Q1.
- The eurozone's June PMI fell for the first time since last October.
- The dollar fell by about 5.3% against the peso in the first half of July.
The consolidative phase for the dollar, we anticipated last week, after its recent drop, is evolving into a proper upside correction. We expect the dollar to trade broadly firmer over the next week or so. It is also part of a larger picture, where US interest rates also look to have put in a near-term bottom and are set to recover. Ideas that the next US administration may favor a weaker dollar has become a talking point. Yet, of all the forces that drive the $7.5 trillion a day foreign exchange market, official preferences are not among the most salient. Nor is it simply a question of asymmetry, where it is thought easier to "talk down" a currency than to talk it up. That was not the case in the run-up to the Plaza Agreement in 1985 or the period before the coordinated material intervention in 2000, marking the end of the Clinton-Rubin-Tech Bubble dollar bull market. That said, the end of the dollar's cyclical rally and the change in the US policy mix could push the dollar in the "desired" direction....
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Week Ahead: U.S. Dollar To Extend Recovery While Stocks Correct Lower