The US dollar has weakened again over the past month or so, leaving it only somewhat higher in trade-weighted terms since the start of its rally at the start of 2022. In other words, the greenback has nearly reversed all of its gains from the Fed tightening cycle and last year’s terms of trade shock. While we don’t expect these tailwinds to re-emerge, we think that the dollar’s selloff has run its course and that the greenback will still rebound later this year as the US and other advanced economies slip into recession.
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