A trifecta of factors support the dollar, including the relatively strong performance of the U.S. economy, tightening monetary by the Federal Reserve, and safe-haven buying. These are likely to remain intact into 2023.
Economic uncertainty may have peaked in the first half of 2022, but it remains high. Stocks are likely to continue to feel the weight of Federal Reserve policy tightening, shrinking market liquidity and slower economic growth.
Rising inflation, rate hikes, supply-chain problems and the Russia-Ukraine war have contributed to growing recession fears. While recessions are impossible to predict, we think the risk of one—sooner rather than later—has picked up.