The US Leading Index is pointing to the possibility of a bigger Dollar fall in 2023 than expected, Kit Juckes, Chief Global FX Strategist at Société Générale, reports.

An old-school indicator warning of trouble ahead for the Dollar 

“I have plotted the 6-month change in the Leading Index against quarterly GDP since the late 1970s. The 6-month change in the index, at -4.4, is clearly in territory that in the past has preceded the economy slipping into recession at some point in the next two or three quarters.”

“The Dollar has risen a long way since 2008 as the US economy has outperformed Europe, and while currency markets are all about relative growth, relative monetary policy and other relative measures, a US recession in 2023 would see the Dollar fall further than anyone expects, particularly if Santa Claus were to find a way to give us peace on earth at some point next year.”