An extract from WPAC's note:

  • As delta continues to permeate through the global economy, including in the US, and with the omicron strain now also looming as a threat, the US dollar has received a strong bid from market participants
  • it seems that the bigger risk playing on market participants’ minds is that these strains will cause yet more supply disruptions and stronger, more-persistent inflation the world over.
  • We look for EUR/USD to rise from a low of USD1.08 in 2022 to USD1.14 at end-2023.
  • Having received benefit from their central banks going with, or ahead of the US FOMC, the UK’s Sterling and Canada’s dollar are unlikely to receive an additional bid over the period, but are expected to hold at a robust level, offering the US dollar little offset against Euro gains. Specifically, from USD1.38 at September 2022, GBP/USD is only forecast to fall to USD1.35 come end-2023.
  • Meanwhile USD/CAD is expected to see little change over the period.