The dollar might defy bearish forecasts.
We are directionally aligned with consensus – like most observers, we believe the greenback will ultimately weaken in 2024 – but we think its descent will be more turbulent than others expect. A number of factors could upset prevailing views: If markets begin questioning the soft landing thesis in earnest, “dollar smile” dynamics could see capital flows re-routed back into US financial markets, triggering a sustained rally in the greenback. Signs of stubbornly sticky inflation might drive a reappraisal across developed-market yield curves, weighing on high-beta currencies. A stimulus-led acceleration in China could lift commodity benchmarks and impact price expectations...