Fed pivot may be the turning point However, over the course of 2023, we expect these drivers to change in ways that may lead to a slowing of the dollar’s ascent, a flattening, and a partial reversal of its upward trajectory. A Fed pivot toward interest-rate cuts, which we expect in the second half of 2023 as inflation slows noticeably, will undercut a major support for the dollar. Related to this, a peak in U.S. Treasury yields will likely ease downward pressure on the Japanese yen by discouraging further outflows, and a hawkish European Central Bank may find that its rate increases gain more traction in supporting the euro in this context. Steadier dollar to ease pressure on emerging currencies If the dollar does peak against developed market currencies in 2023, as we expect, with the euro and yen finally finding some support, emerging market currencies may also stabilize as the pressure of a globally strong dollar eases. Ongoing stress within the Chinese economy should allow for outperformance of those currencies more closely linked to the U.S. economy than to China as the former emerges from recession. 8 | 2023 Outlook Please see pages 25–27 for important definitions and risk considerations.