Resilience of the US economy and higher long-term US yields are proving more support for USD – MUFG
|Rising US yields continue to offer more support for the USD, economists at MUFG Bank report.
Long-term US yields continue to move higher
The resilience of the US economy to higher rates continues to surprise market participants and has prompted market participants to scale back expectations for rate cuts next year. Even after the recent scaling back of rate cut expectations, market participants are still expecting around 100 bps of cuts next year.
The sharper-than-expected slowdown in US inflation and lagged impact of monetary tightening are expected to create room for the Fed to make policy less restrictive in 2024. In the near term though the resilience of the US economy and higher long-term US yields are proving more support for the US Dollar.
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