Deutsche Bank: The dollar may have room to rise because the rate cut is priced too far

Tim Baker, Asia Pacific G-10 FX and Intrerest Rate strategist at Deutsche Bank in Sydney, said the dollar's recent rebound has some room for extension, as the market may have gone too far in pricing in a swift and large rate cut by the Federal Reserve. He said that the dollar was sold off at the end of 2023 after reaching very high levels, but the decline may have been overdone. He believes that the eurozone, as well as the United Kingdom, where inflation has fallen more than the United States, does not rule out cutting Intrerest rates as much, as quickly and even more than the Fed. The current US growth outlook also looks much better, which means that the Fed will not face the same pressure to cut interest rates as the Central Bank and the Central Bank of England. According to Baker, there are many reasons to think that the structural level of the dollar should be higher than in the past. The old belief that the EUR/USD Exchange Rate is 1.10 or 1.20 may need to be changed.