USD should peak as the Fed approaches pausing its interest rate hikes – Morgan Stanley
02.12.2022, 12:26

USD should peak as the Fed approaches pausing its interest rate hikes – Morgan Stanley

What will China’s reopening mean for the US? Here is what economists at Morgan Stanley think you need to know.

Fed will be able to slow and eventually pause its rate hikes in 2023

“China's restrictive COVID zero policy will be a thing of the past come spring of 2023, but there will be many fits and starts along the way. This dynamic is important to understand for its implications to the outlook for the global economy and key markets.”

“The economic growth story for Asia should be weak in the near term, but begin to improve and outperform the rest of the world from the second quarter of 2023 through the balance of the year.” 

“In the US, the reopening of the China economy should help ease inflation as the supply of core goods picks up with supply chains running more smoothly. This, in turn, supports the notion that the Fed will be able to slow and eventually pause its rate hikes in 2023.” 

“Look to the foreign exchange markets. China's currency should relatively benefit, particularly if reopening leads investors back to its equity markets. The US Dollar, however, should peak, as the Fed approaches pausing its interest rate hikes and, accordingly, ceasing the increase in the interest rate advantage for holding USD assets versus the rest of the world.”

 

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