USD strength extended as Federal Reserve races ahead with tightening, but that will fade into 2023 as other major central banks press on with normalizing policy, economists at CIBC Capital Markets report.

Near term risks tilted towards the USD building further on its gains

“While Chair Powell was less committal on the possibility of another 75 bps hike in July, we still see the risks tilted in that direction.”

“We ultimately see slowing growth and a turn in inflation as convincing the Fed to back away from what its most hawkish members are now advocating, paving the way towards a softer greenback in 2023. But that's not going to be apparent in the next few months, leaving the near term risks still tilted towards the USD retaining or even building further on its recent gains.”