Dollar Losing Some Sparkle
by AIB Treasury Economic Research Unit
- Having been very much to the fore for the first three quarters of last year, the dollar lost some ground in the final months of 2022.
- This reversal of fortunes was initially reflected in EUR/USD moving back up towards parity, having fallen to a low of $0.95 in late September.
- The coming year seems likely to be characterized by further rate hikes in the opening half of 2023, with monetary policy being put on hold thereafter.
- From a euro viewpoint, the ECB has turned quite hawkish and moved to an aggressive rate tightening path.
- Interest rates have been as key driver of currencies in the past number of years.
- In this regard, UK CPI inflation data due this week will be in focus.
- Overall though, the rapid rise in prices in 2022 has squeezed real incomes and weighed on spending, as evidenced by retail sales data.
- Retail sales data will also feature in the US this week.
- In the Eurozone, the latest ECB monetary policy meeting account will be of interest.
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