This week, the Fed cut interest rates, while the Bank of Japan and the ECB kept theirs unchanged. Despite this, the dollar is strengthening rather than weakening. In this currency report, we examine why this is happening and what the outlook is for the most important exchange rates.
 

While the Fed is likely to cut interest rates further, we expect the focus to shift quickly to higher growth and more upward pressure on inflation. That means rising long-term interest rates and a turning point for investors who are still betting on falling long-term yields.

Investors seem to believe in a Goldilocks scenario — steady growth, easing inflation, and supportive liquidity. Yet, while markets brush aside concerns like the government shutdown and trade tensions, more fundamental risks are quietly building. Liquidity can change course abruptly, as last week’s sharp drop in precious metals reminded us. We adjust our tactical asset allocation to reflect a short-term bullish stance amid rapidly rising risks.