BoA see scope for USD resilience to continue, & Fed's focus to shift from higher to longer

<p>Bank of America analysts like the US dollar, saying they "see scope for the USD's resilience to continue."</p><p>BoA make some useful points in the note, spanning the dollar and the Federal Reserve:</p><ul><li>Signs of growth divergence continue to favour the US. pulling up nominal and real rate differentials </li><li>the mix of robust growth along with disinflation can suggest that central banks do not need to risk over-tightening, while at the same time, the economy could find equilibrium at a higher neutral interest rate</li><li>Fed funds pricing for the remainder of 2023 has been stable, suggesting that the market believes that the Fed is at or near the terminal rate </li><li>And while we see scope for even more cuts to be priced out for next year, the Fed funds futures (FFF) curve spanning 2024 has already removed -50bp of cuts since immediately after the June CPI.</li><li>the USD's correlation to changes in the 2024 curve is rising</li><li>Going forward, the focus will likely shift from the "higher" part of policy guidance to the "longer" part</li></ul><p>Bolding above is mine. </p><p>To illustrate the USD correlation with Fed Funds BoA print this graph:</p>

This article was written by Eamonn Sheridan at www.forexlive.com.