Uncertainty over central bank’s reaction functions remained elevated in April as concerns over financial stability and the level of deterioration in credit conditions persisted. This resulted in lower FX volatility and reduced conviction amongst both traders and analysts across most major pairs.  It is in this context that we continue to look for an extension in the dollar’s decline as we expect the Fed to draw a halt to its hiking cycle, but the path lower is unlikely to be smooth as market continue to evaluate the outlook and risks facing the US economy. With central banks in the US and elsewhere hitting the end of their hiking cycles, we see near-term policy expectations losing some of their impact on FX volatility, with markets increasingly focused on the medium-term path for rates and growth. Where central banks are seen as further from terminal, such as the UK and Eurozone, near-term policy expectations are likely to still have an impact on their respective currencies, although in the case of the UK there is an argument that a more dovish BoE rate profile won’t necessarily weigh heavy on sterling. All said, however, our conviction in these calls remains low as we still await guidance from the next round of central bank meetings and incoming hard data. Both of which will provide colour on what the immediate trading environment looks like in terms of rates and recession likelihood.