With: 

Sam Lynton-Brown, CFA,  Head of Global Developed Markets Strategy

Alex Jekov, G10 FX Strategist

BNP Paribas | Global Markets (Recorded 15 February  2022)   

We analysed USD performance during Fed rate hike cycles and reject the widely-held consensus that the USD peaks versus low beta FX prior to Fed lift-off, rather conclusions are nuanced.

We find that the USD performed better when the starting level of rate spreads was wide and in the USD’s favour, especially if US risky assets are stable despite higher yields.

We also find that the speed of tightening is not indicative of USD performance throughout the cycle.

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