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Take a financial markets poll: Will USD weaken in 2023?


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  1. 1. Could USD lose its grip on the financial markets in 2023?

    • Yes
      6
    • No
      5

We would love to hear from you, vote on USD poll. Share any analysis with the Community and comment on this blog why you think USD will weaken or not this year 2023. 

 

USD in 2023

A Reuter's poll suggests the dollar's grip on FX markets will loosen this year. In 2022 the greenback scored its best annual performance since 2015, rising against almost every currency.

 

 Jeremy Naylor | Writer, London | Publication date: Thursday 12 January 2023

USD on the way down?

A Reuters poll out on this Friday suggests that the dollar could lose its grip on the financial markets, a grip that it held for pretty much all of 2022.

Dollar basket

Let's take a look, first of all, at what's happening with the dollar basket. The dollar had its best performance since 2015, rising against almost every other single currency.

This year could be different, according to the poll, as a majority of forex strategists expect most major and emerging market currencies to post marginal gains against the greenback over the coming 12 months. The dollar basket between those two lines, you can see that for the year's performance overall.

EUR/USD

In terms of the main trade, the euro/dollar, that's just down nearly 13% last year. Currency strategists surveyed expect the pair only to recoup around a third of those losses that we've saw over the last year.

USD/JPY

So far as the Japanese yen is concerned, that to some degree had a different story of its own but were really big gains for the dollar, against the Japanese yen, losing as much as a fifth of its value over all the yen against the greenback.

The Bank of Japan's surprise tweak to its bond yield curve control sent the yen on the other way, but the yen ended the year 12% lower against the dollar. It's expected to gain around 4% by the end of 2023, according to this poll released by Reuters.

USDSource: Bloomberg

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Will USD weaken in 2023?

In my view I think USD will weaken. I read this piece from FXStreet to be interesting.

 

Experts Predict U.S. Dollar Will Stay Strong In 2023. What Does This Mean For You?

SOPA IMAGES/LIGHTROCKET VIA GETTY IMAGES 

 

USD is likely to weaken further in 2023 after a choppy end in 2022 – HSBC
NEWS | 1/11/2023  | By FXStreet Insights Team

The broad US Dollar tore between opposing forces last month, with the USD Index (DXY) ending the month lower. Economists at HSBC look for USD weakness in 2023.

A US economic soft landing should see the USD broadly weaken
“We believe the USD will weaken further in 2023, as its significant overvaluation (based on the real effective exchange rate (REER) can no longer be supported, once the Fed stops hiking, global growth shows signs of toughing and market volatility comes down.”

“We acknowledge there would be ‘safe-haven’ demand for the USD, if the US economy goes into a deep recession. However, we see that as a risk scenario, rather than an inevitable outcome.”

“If the US economy manages a softer descent, the USD is likely to weaken. That is our base case for 2023.”

 

 

My conclusion seeing that the Dollar Index beginning 2023 showed Dollar weakness and broke daily upward trend line (charts below) there is a possibility of Dollar weakness this year. 

A number of factors, both domestic and international, have contributed to the strength of USD last year in 2022. Though economic conditions could shift in 2023, experts predict the dollar will hold a strong position.

image.thumb.png.799a985227bf40183b4fa6849b7eb7cf.png

 

Upward trendlines been broken to the downside since the last quarter of 2022 and now another break this year Jan 2023 for more downside?

image.thumb.png.354b4d10239d23d518ae8b3022b66924.png

 

It will be interesting to see how the Dollar will perform this year.

Happy trading everyone! Cheers

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