The trade-weighted US Dollar Index against a basket of 26 currencies is up more than 5% from its July low. Economists at the National Bank of Canada analyze Greenback’s outlook.
Interest rate differentials support Dollar appreciation
The USD’s strength has been supported by widening interest rate differentials with its major trading partners. US yields were driven higher by resilient inflation and stronger-than-expected payroll job creation.
At this point, we still expect some USD appreciation until early 2024, which could be further boosted by renewed geopolitical tensions with the opening of a new front in an armed conflict, this time in the Middle East.
