Looking ahead to Q3, the US dollar is likely to remain range bound with data releases dominating. As discussed, interest rates are close to, or have, bottomed out, while the US debt ceiling debacle, and its effect on short-term US interest rates, is now in the rear-view mirror. The potential for other G7 countries to close their interest-rate differential with the US – the ECB and UK are fully expected to keep hiking rates – will keep downward pressure on the US dollar, or at least temper any move higher. The current ‘wave pattern’ seen in the US dollar index is likely to continue alongside low levels of volatility. The US dollar is set to be driven by external influences as much as domestic data in Q3.

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