Stephen Jane, CEO of Eurizon SLJ Capital, explained that the US dollar could decline by up to 15% against major global currencies over the next 18 months, as inflation continues to ease, allowing the Federal Reserve to ease its monetary policy.
And “Eurizon SLJ Capital”, is a global investment management company.
Jin said the US Federal Reserve is likely close to passing the peak, which means interest rate cuts are on the horizon.
He concluded that the Fed’s rate hikes, combined with tighter credit conditions stemming from the US banking crisis, do indicate that inflation is heading downward.
“We expect US inflation to continue to decline at about the same pace as it rose in 2021 and the first half of 2022: historically, there has been little evidence of negative stabilization in inflation, even if there is evidence of falling prices and the wage level,” he said. .
He argued that “the already weak level of economic activity in key parts of the world, paradoxically, is preventing global demand from collapsing,” indicating a significantly weaker US currency.
The US dollar index, which measures the greenback’s strength against a basket of rival currencies, has fallen 2.46% over the past four weeks after rising 7.9% in 2022.
According to Jain, in the next 18 months, “the US currency will be subject to significant depreciation (10-15%).”
Stephen Jane is best known for inventing the so-called dollar smile theory, according to which the dollar tends to strengthen when the US economy is either strong or weak, but diminish in times of recession.
“The key point to make here is that, consistent with our “Dollar Smile” framework, a fade in inflation with a soft landing should push the dollar to a deep bottom,” said Eurizon strategists.