A few months on, each of the motivating factors for this downbeat view has been challenged, if not reversed outright. “In our view, the top trading themes for 2023 are regional growth rotation away from the U.S., at least temporarily toward China, and greater differentiation with high beta FX.”īack in November 2022, J.P. Morgan Research took a dim view of the euro, with euro/dollar forecast to hover around 0.95-1.00 in 2023. exceptionalism seems to point toward a period at the trough of the dollar smile, whose duration is uncertain,” said Chandan. “We still hold longer-term reservations about the broader trajectory of the global cycle, which we think should be generally dollar-positive, but the interim period of both positive global surprises and less U.S.
Overall, while J.P. Morgan Research still forecasts modest dollar strength in 2023, it is taking a neutral stance on the USD. Markets are now aggressively pricing Fed easing on the back of growing signs of disinflation, while the outlook for global growth this year is no longer looking as pessimistic as it did earlier in 2022,” said Meera Chandan, Global FX Strategist at J.P. Morgan. “The confluence of factors that had proved so supportive of the dollar earlier in 2022 has since inverted.
Such weakness reflects a mean reversion from the dollar’s outsized gains in 2022. After a historic bull run last year, the nominal broad dollar index fell almost 7% between November 2022 and January 2023.
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