For now, the focus remains on incoming data – especially the October CPI print that is due next week. 

Despite the surprisingly cautious tone taken by Fed Chair Powell last week, we’re of the mind that stronger activity in the US is more likely to persist. That suggests that USD dips should be bought into, and CAD investors should pare hedges on USD inflows over the coming months. 

Towards H2 of next year, we expect USD valuation to peak as markets reassess the viability of the Fed’s QT program while the much anticipated JPY rally starts to take hold across the FX space.

DXY – Q4 2023: 108.88 | Q1 2024: 109.19