The dollar long con looks to be brought forward. But what has changed?
The disinflation process has proven to be a bit bumpy also as of late, albeit still largely running its course. However, the muddied outlook now makes it tough to envisage a smooth and clear path back towards the 2% target. Not least with the US consumer still running hot, despite a softening labour market.
As such, the reaction function suggests that any tail risk that materially leads to a different scenario other than that will be bad for the dollar. That being these few couple of situations:
The economy turns out to be much softer in 2025, with labour market slack gathering paceThe disinflation process stays the course and resumes a quicker pace again in the new yearTrump tariffs are not as forceful and high octane as anticipated, leading to less inflation fearsTrump tax cuts hit a bit of a snag and gives markets more time to digest the whole situationThat's giving the dollar a tailwind going into the turn of the year. But as we saw with how things played out this year, this sort of tailwind can eventually dissipate and turn the other way around. At some point in the middle of 2024, we were talking about just one rate cut by the Fed for the year as opposed to the six priced in during December 2023.
So, that is pretty much where we're at. It's a case of markets having a rough idea of what may transpire in 2025 but nothing is a given. In trading, the journey is just as important as the destination at the end of the day.
This article was written by Justin Low at www.forexlive.com. Read More Details
Finally We wish PressBee provided you with enough information of ( What's at stake for the dollar in 2025? )
Also on site :