More sustained USD losses may develop Fed expectations to go soft on rates next week – Scotiabank

The US Dollar is mixed. Economists at Scotiabank note that the greenback could sustain losses if markets expect the Fed to go soft next week.

Choppy ranges are likely for now

“Markets are still working through the developments of the past few days, it seems and pondering the implications for monetary policy. The disinflationary impact of financial market stress may well leave central banks more cautious about raising interest rates but it is perhaps too soon to say exactly what the consequences of bank share volatility will be at this point.”

“Proceeding – cautiously – might be the best option for policymakers. Jittery and unsettled trends in FX may continue in the meantime.” 

“More sustained USD losses may develop if it looks as if the Fed is going soft on rates next week but choppy ranges are likely ahead of that.”