USD: Early strength in 2024 unlikely to last all year – Morgan Stanley
15.11.2023, 11:45

USD: Early strength in 2024 unlikely to last all year – Morgan Stanley

Economists at Morgan Stanley assess USD outlook for the next year.

Recent strengthening of USD to continue for a while longer

We expect the recent strengthening of the US Dollar to continue for a while longer. 

US growth, while slowing, is expected to outperform consensus expectations and remain near potential growth rates in the first half of 2024. This is going to contrast quite sharply with recessionary or near recessionary conditions in Europe and pretty uncompelling rates of growth in China.

When we look at our US and European rate strategy teams’s forecasts, they have rates moving in favor of the Dollar. 

The Dollar likely is going to keep outperforming other currencies around the world due to its pretty defensive characteristics in a world of continued low growth, and downside risks from very tight central bank monetary policy and geopolitical risks. The Dollar not only offers liquidity and safe haven status but also high yields, which is of course making it pretty appealing.

We do not expect this early strength in USD to last all year, though, as fiscal support for the US economy falls back and the impact of high rates takes over, US growth slows down and the Fed starts to cut around the middle of the year.

 

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