Tag Archives: Dollar strength

An ECB commitment not to hike rates at least until summer 2019 has added to recent euro weakness against the dollar, but factors behind the long-term decline of the latter could soon come back to the fore.The ECB’s commitment on rates announced at its June monetary policy meeting showed it remains very prudent. Given recent unsupportive data, the euro likely faces high hurdles to significant appreciation in the short term. Macro data in the euro area may not be supportive in the very short...

Extreme negative sentiment on the greenback and improving US data should pave the way for a significant US dollar rebound.Following disappointing US economic data and another failure to form a Republican majority on key legislation, the US dollar has slipped to a 10-month low, at 94.68 on 18 July.This extreme USD weakness has led to strong negative market sentiment, as highlighted by speculative positions on the futures market.Although we acknowledge that the foundations (rising inflation...

Although close to the end of a long-term up-cycle, the dollar has the potential to recover ground lost recently given the outlook for Fed rate rises and balance sheet reduction.Our latest forecasts for major currencies over the coming months can be summarised as follows:US dollar. In terms of duration and valuation, the USD up-cycle is likely close to ending. However, the USD is likely to remain strong on the back of robust US growth and the outlook for inflation. It should also benefit from...

The euro rose sharply against the US dollar after a speech by Mario Draghi today. We still expect the US dollar to strengthen in the coming months.The euro appreciated significantly against the US dollar (by as much as 1.4% at one stage) on 27 June, reaching a 10-month high. The main reaon was a speech by ECB President Mario Draghi at the ECB forum on central banking at Sintra. To a lesser extent, the ongoing struggle to find legislative consensus among the US Republican Party, highlighted...

Barring a French election surprise, the downside potential for the euro against the US dollar looks limited in the next few months, but there is still room for the US dollar to strengthen again.The monetary policy meetings of the European Central Bank (ECB) on 9 March and of the Federal Reserve on 15 March have put upward pressure on the euro versus the US dollar. Euro area real rates have risen on prospects for an early rate hike whereas US real rates have declined on the perceived...

Given a widening real yield differential, we see the dollar continue to rise, especially against the yen, while further sterling downside looks limited.Our latest forecasts for individual currencies in 2017 can be summarised as follows:US dollar. The USD is likely to remain strong on the back of an improving US growth and inflation outlook as well as continued monetary policy divergence. Our base case scenario is for a Trump administration that puts the emphasis on growth without too much by...