In the view of economists at HSBC, the USD’s outlook depends on global growth, risk appetite, and relative yields but they still do not see a shift in these three drivers. As such, the US dollar will remain resilient.

Ongoing and persistent strength

The USD is likely to remain supported by a deteriorating global growth outlook, with rising recession probabilities in Europe and the UK. 

“The Federal Reserve is likely to continue to hike rates until early 2023 before keeping its policy rate steady throughout 2023, according to our economists and the current rates market expectations. In other words, the Fed’s tightening path and associated USD strength are likely to persist.” 

“It is hard to see how risk appetite can change for the better, while global growth weakness and central banks pivoting to rate cuts are not on the near-term horizon. The current risk-averse tone in financial markets is likely to also support the USD, given its ‘safe-haven’ profile. Nonetheless, it will be important to see if risk appetite improves, once markets believe central banks have raised rates enough.”