Currency Outlook

DECEMBER 2022 – IN BRIEF

What Happened

  • U.S. Dollar strength faded in November, marking its worst monthly performance since 2010
  • As foreseen, a messy reopening in China and evidence of slower price growth caused the buck to fall 5.0%
  • Fears over a deep recession have subsided, giving way to a major recovery across Emerging-Market FX flows
  • Sterling reached its highest value since August, while the Euro rose to its strongest since July
  • U.S. Equities rose 5.6% for the month despite growing reports of layoffs and downgraded outlooks

 

Monex USA’s View

  • Fed is likely to slow its pace of rate hikes by making a 50-basis-point increment at their Dec. 14th meeting
  • China’s situation will be closely watched after protests forced authorities to reconsider their COVID approach
  • European Central Bank messaging will determine if a hawkish approach further uplifts a resurging EUR
  • MXN levels will be tested after hitting a two-and-a-half-year zenith based on an economic rebound
  • Uncertainty over 2023 remains, with FX volatility still high and markets overwhelmed with risk events

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