We think that the upside for the US dollar is limited in our baseline scenario, in which the conflict ends before long and the energy shock start to unwind (and with it the improvement in the US terms of trade). But tailwinds from a shift in yield gaps in the dollar's favour and further US equity outperformance should still see it rally over the course of the year. In our adverse scenario, in which the war is more protracted and causes significant damage to energy infrastructure, we think there is more scope for the dollar to rally as it benefits from a further US-positive shift in the terms of trade and increased demand for safe-havens.
An overview of our currency forecasts is available through our FX Dashboard.