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Analysts at CIBC, expect the US Dollar Index (DXY) to drop to 93.7 during the third quarter and to 90.8 over the first quarter of 2020.  

Key Quotes:  

“After outpacing global central banks in terms of tightening cycles, the Fed has taken itself out of the rate hike game through 2019. We’re in agreement with markets that the next move by the Fed will be a cut, but we see that 25 bp ease showing up in 2020. Until then, monetary policy normalization by central banks abroad should put a lid on USD strength.”

“With the slow start to 2019 for large global economies seemingly behind us, a stabilization in growth at a higher rate in the eurozone, and thawing trade tensions, should see the greenback give back some strength.”

“The lack of inflationary pressures amidst rising wage growth have been a key deterrent for the Fed. Policymakers aren’t yet projecting a rate cut, something that we think they will have to come to terms with following the dissipation of the rebound in growth in Q2 following the end of the government shutdown.”

“Come 2020, the contraction in government spending that is in store should be enough to induce a rate cut by the Fed in order to keep the economy at full employment. And combined with a deep current account deficit, that should see DXY strength fade for the foreseeable future.”