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Inflation uncertainty could keep the dollar stronger for longer

Stronger-than-expected CPI and PPI data out of the US were the key catalysts for the greenback’s rebound this week, as investors continued to pare back their expectations for the Fed to cut its policy rate. These expectations will be put to the test next week as the Fed and 12 other major central banks announce policy. With monetary policymakers in Europe and some emerging markets preparing to ease policy rates (or already doing so) while the Fed appears set to keep rates higher for (at least a bit) longer, our sense is that the US dollar will stay strong against most currencies in the short term.

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