FXStreet reports that the US dollar is in fierce focus as the currency weakens across the G10. The narrative around this trade has been easy to see: low US rates, rising political tension in the US and struggles to form consensus around the next round of much needed fiscal stimulus. Add to this a rollover in the US’s growth pulse as closures hit confidence, and the recipe for weakness is complete. While economists at ANZ Bank agree there is some risk that the USD will weaken a bit more this year, they think talk of its death is premature.
“Many are seeing that the multi-year breakdown in the USD has begun and a longer-term bear market is about to take hold. We are less sure about that but see scope for weakness in the near-term.”
“The broader secular turn is likely to need more ingredients, a more certain global growth environment, a more viable alternative to the USD as an invoicing currency and a safe asset market that is deeper and more liquid than the treasury market. The latter two conditions are a way off. The US treasury market is larger than all others, with nearly 40% of all debt securities on issue. The EU is a distant second, with just 20% of securities outstanding.”
“On the demand front, the US consumer market remains globally critical. Together with a deep capital market in which to park profits and working capital and the free convertibility, the USD is likely to remain the invoicing currency of choice for most trades.”
“The growth hurdle, though, is lower. We think the trajectory of global growth will be the strongest driver of the USD in coming months. The question is whether we can trigger a virtuous cycle between the USD and global growth. Over the remainder of 2020, we give this better than even odds, but beyond that, reading this as the beginning of a multi-year depreciation in the USD looks premature given the number of identifiable exogenous shocks that exist.”
“The pandemic’s impact, the escalation of US-China tensions and the scale of current (unsustainable) fiscal support all challenge this narrative. So we think the road ahead may see some weakness, but it is way too soon to call for the end of the USD’s reign.”
© 2000-2020. All rights reserved.
This site is managed by Teletrade D.J. Limited 20599 IBC 2012 (First Floor, First St. Vincent Bank Ltd Building, James Street, Kingstown, St. Vincent and the Grenadines).
The information on this website is for informational purposes only and does not constitute any investment advice.
Making transactions on financial markets with marginal financial instruments opens up wide possibilities and allows investors who are willing to take risks to earn high profits, carrying a potentially high risk of losses at the same time. Therefore you should responsibly approach the issue of choosing the appropriate investment strategy, taking the available resources into account, before starting trading.
Use of the information: full or partial use of materials from this website must always be referenced to TeleTrade as the source of information. Use of the materials on the Internet must be accompanied by a hyperlink to teletrade.org. Automatic import of materials and information from this website is prohibited.
Please contact our PR department if you have any questions or need assistance at firstname.lastname@example.org.