USD Set to Depreciate Until Q4 2024 - Citi
(12 January 2024 – United States) The greenback is set to remain under pressure before recovering later in the year as chances of a recession rise, Citigroup FX strategists report.
The US Federal Reserve projected it could cut rates by as much as 75 basis points in 2024 from their current range of 5.25 to 5.50 percent. The Euro has advanced almost five percent against the USD since early Q3 2023 as investors make an about face on US interest rate rises.
Euro zone inflation jumped in December, supporting the European Central Bank's (ECB) case to maintain interest rates at record highs even as cooling US inflation is widely expected to allow the Federal Reserve to start reducing interest rates by Q4 2024.
"Tactically, we are a bit more constructive on the euro (vs the dollar) in terms of looking for the ECB to be a lot slower to pivot than the Fed" commented Citi G10 FX Strategy Head, Daniel Tobon
"We do think that ultimately the dollar can strengthen a bit later on in the year given our economists call for a US recession and ultimately an ECB pivot. Economic strength in Europe is the biggest risk to our call for a recovery in the USD in the later part of the year, as it will allow the ECB to remain hawkish" Tobon added.
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