The expectation of a recession in the US is no longer a disadvantage for the dollar if Europe were also to slide into a recession. Economists at Commerzbank still expect the greenback to outperform in the new scenario.

Recession on both sides of the Atlantic to weaken EM currencies

“A recession in Europe caused by a gas crisis is likely to be deeper and longer because it cannot ‘simply’ be ended by an adjustment of monetary policy. It is therefore only logical that the US dollar is going to be the winner in the new situation.”

“If it becomes more likely that for different reasons the US and Europe will slide into a recession that is not a good sign for global commodity demand. That is why the Canadian dollar is more seriously affected than Canada's position in the global trade network would suggest.”

“The prospect of a recession on both sides of the Atlantic is of course weakening the EM currencies. First of all due to increased risk aversion and secondly as the EM are likely to struggle to decouple from developments in the developed economies under these circumstances.”