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Untangling the effect of Omicron, the Fed, and China easing

Three recent developments – the emergence of the Omicron variant, the Fed’s signal that it may further accelerate the pace of policy normalisation, and China’s move towards policy easing – have combined to create crosswinds for currency markets. While we continue to think that there is scope for the dollar to strengthen further next year, its relentless march higher may be due a pause before too long.

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