USD is prone to a sizeable correction in the long run – Scotiabank

The USD is trading generally lower as the Q4 consolidation in the 2022 rally extends. Economists at Scotiabank believe that the greenback is set to suffer a sizeable corerction.

USD is poised to remain relatively firm in the short run

“Broadly, we think the USD is poised to remain relatively firm in the short run but we do think the long run USD rally is looking over-extended and prone to a sizeable correction.” 

“Seasonal pressures (USD-negative) are working as expected and should exert a little more negative influence on the broader trend in the next few weeks, assuming year-end liquidity pressures remain contained.”

“A sharper fall in the USD may have to wait until investors are more convinced the Fed tightening cycle is complete.”