We expect the Dollar Index to fall by just under 5% to 97 in 2024, but to put that in context, it has lost 5% since October 3, so we’re not exactly forecasting fireworks.

Today, disappointing European PMI data have prevented EUR/USD from kicking on after breaking above 1.10 on Thursday and that is going to be a familiar pattern as long as the European economy struggles. 

Our forecasts for European GDP growth are less pessimistic than the market consensus for 2024 (and we expect the ECB to be much slower than the Fed to cut rates) but further gains for the Euro (and the Pound) require economic pessimism to ease. Put simply, the divergence in consensus forecasts of Eurozone, US and UK GDP growth for 2024 is going to slow and limit the Dollar’s fall unless the trends change.