By and large, this week in FX markets is an exercise in unwinding some of the post-NFP Dollar strength. What happens to the Dollar if US rates peak at 6%? Kit Juckes, Chief Global FX Strategist at Société Générale, thinks that would support the greenback.

A change of conversation

“The discussions I’ve been having with clients definitely turned towards the possibility and implications of the Fed going well beyond the 5-5.25% peak everyone has been forecasting.”

“What would 6% do? Glancing at the Bloomberg economists’ survey there are quite a few banks that think we’ll be at 5.25% well into 2024, but no one has yet put down a 5.5% peak, let alone something higher. The obvious answer is that a 5.5% peak, instead of 5.25%, means little, but 6% increases the risk of the cycle ending messily. And that would support the Dollar and be bad for risk-sensitive currencies everywhere.”