Another robust US non-farm payrolls report has seen the dollar rebound a bit, unwinding some of its losses earlier in the week and putting the DXY index on track to end the week near its highest level on the year. With FOMC members continuing to signal patience on the timing of rate cuts even as many other major central banks appear increasingly inclined to start cutting before too long, the dollar may well remain on the front foot in the near term. That said, with money markets now discounting a bit less than the 75bp of cuts in 2024 implied by the Fed’s dot plot, the bar is relatively high for another leg up in US interest rate expectations and, consequently, the dollar. Our base case remains that most of the key currency pairs will stay rangebound this year, with the dollar eventually easing back once the FOMC shifts more decisively towards rate cuts.
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