USD has generally weakened once peak rates are in – Scotiabank

The US Dollar Index is stretching gains for a sixth consecutive session and is near to taking back 50% of the early July sell-off. Shaun Osborne, Chief FX Strategist at Scotiabank, analyzes Greenback’s outlook.

USD to weaken in H2

While the DXY rebound has extended a bit more than I expected the broader outlook for the USD remains somewhat challenging and I still rather look for the USD to weaken in H2. 

The Fed is expected to hike on Wednesday and that move is generally seen as the last in the cycle. Policymakers will want to leave the door open to more tightening down the road but history shows markets are quite attuned to the top of the rate cycle when it comes and the USD has generally weakened once peak rates are in.