Economists at the Bank of America Global Research expect the US Dollar to remain on a solid foot at the beginning of 2023 but to drift lower as the year unfolds.

Positive USD forces remain, but will fade gradually

“For now, the forces that have supported the USD this year remain valid, despite the recent correction lower.” 

“In our baseline, the USD remains strong early next year and starts a more sustained downward path after the Fed pauses.”

“We forecast EUR/USD at parity and USD/JPY at 146 by 1Q23. However, in our baseline the USD gradually weakens starting in Q2, to 1.10 for EUR/USD and to 135 for USD/JPY by end-2023, with our EUR/USD forecast above the consensus.”