Martin Enlund, analyst at Nordea Markets, suggests that US growth expectations have been falling in relative terms since the start of the summer and if this trend continues, it could weaken the USD at some point.

“Looking at empirical evidence, however, we argue that US growth expectations need to converge with the rest of the world before any significant weakening occurs – right now, relative growth expectations are still consistent with a USD that will strengthen 5% on an annualised basis. It is also striking is how Euro-area (EA) data has generally kept disappointing. A weaker EUR, record-low bond yields and accelerating monetary growth have so far failed to stabilise activity growth. Instead, the most recent PMI for manufacturing was the weakest since 2012, and there are sadly more and more signs that weakness in the manufacturing sector has started to spill over into the more employment-heavy service sector. Even as US growth estimates are lowered, we argue that the country is still outperforming well enough to keep the USD firm.”