As central banks around the world continue to ease policy rates, market participants are grappling with a key question: is the US economy losing momentum or reaccelerating? The answer has significant implications for the US dollar (USD) and other currencies. While some analysts believe that continued easing is justified given the current economic environment, others argue that a rebound in growth could limit the downward pressure on the USD.

In recent minutes, the Federal Open Market Committee (FOMC) revealed a more hawkish tone than expected, suggesting that further easing may be on the horizon. However, the debate around the US economy’s trajectory is far from settled. Some analysts point to disappointing data out of New Zealand (NZD), where the Reserve Bank of New Zealand (RBNZ) is expected to lower policy rates on Wednesday. HSBC Economics forecasts a 33bps cut, but there is a risk of a larger easing given recent weakness in the NZD.

Meanwhile, the Bank of Thailand (BoT) is also anticipated to lower its policy rate on Wednesday, with some predicting a 25bps cut to 1.25%. However, there is a risk of a larger easing, which could further challenge the Thai baht (THB). The BoT has been pushing back against a strong THB in recent times, highlighting the complexities of monetary policy in the current environment.

The divergent views on the US economy’s trajectory underscore the challenges faced by central banks in navigating their policy decisions. While easing may be necessary to support economic growth, it can also lead to a weaker currency, which can have implications for inflation and trade balances. As such, central banks must carefully consider the potential impact of their actions on the broader economy before making any decisions.

While central banks continue to ease policy rates, the debate around the US economy’s momentum or rebound remains a key factor in shaping currency markets. As market participants await further clarity on the economic outlook, they must remain vigilant and adapt their strategies accordingly.