Despite the news from Fitch, over the past week, Greenback had been performing well, as it was the best performing G10 currency ahead of the release of the softer-than-expected US July payrolls. Economists at Rabobank analyze USD outlook.
USD to remain more focused on monetary policy and the relative strength of US growth
Fitch’s decision to downgrade the US credit rating has turned attention to next week’s Treasury supply though the USD’s safe haven appeal suggests that impact from the Fitch decision is likely to be limited.
Fed policy remains in the driving seat. While we expect that Fed funds have likely peaked, a higher for longer outlook is USD supportive.
Greenback is also likely to derive support from the fact that some EM central banks have already started their rate cutting cycles and from the likelihood that policy rates are in the process of peaking in several other G10 countries.
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