More sustained USD losses may develop Fed expectations to go soft on rates next week – Scotiabank

More sustained USD losses, Scotiabank

US dollars are fluctuating. According to economists at Scotiabank, if markets anticipate the Fed to loosen policy next week, the dollar could suffer losses.

Range choppy is expected for the moment.
“It appears that markets are still processing the events of the last few days and considering the implications for monetary policy. It’s possible that the deflationary effects of financial market stress will make central banks more hesitant to raise interest rates, but it’s now too early to determine with certainty what the effects of bank share volatility will be.

The wisest course of action for policymakers may be to move forward carefully. In the interim, jittery and unsettling tendencies in FX may persist.

If it appears that the Fed will ease policy next week, further sustained USD losses could materialise, but bumpy ranges are probably still ahead.