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-Dollar wears losses in the new week as analysts face off on prospects.
-Morgan Stanley cites the growth dynamic, positioning, for the bearish view.
– The Economy-Capital quotes relative rates for favorable forecasts. Adobe Stock
The dollar is relaxed on Monday, but analysts are still divided on the outlook for the US currency, which will be tested this week by the results of several central bank meetings and by a tense institutional positioning against the greenback.
Most analysts agree that it is only a matter of time before the 2017 dollar downtrend resumes, although there is a widespread disagreement about how quickly the market will turn. Some say the dollar could renew its earlier declines as early as mid-August, while others predict that a turning point will not occur before the New Year.
"Recently, the economic data in the rest of the world (RoW) started We expect this trend to continue under the positive effect of US fiscal stimulus measures and commercial tariffs (anticipated loading of purchases before tariffs come into effect This convergence in global data should support the weakness of the US dollar, "says Morgan FX's Gek Teng Khoo, FX Strategist
US GDP growth has been growing at a rapid pace annualized 4.1% in the last three months at the end of June, up sharply from the revised upward growth rate of 2.2% at the beginning of the year, but slightly below consensus for an increase of 4.2%.
and the lack against expectations was tiny bu Nevertheless, it was noted by the market. The US dollar did not benefit from the long-awaited report, as could be expected. Instead, the Dollar index was traded on the weekend before experiencing a weak start on Monday.
Above: Effective exchange rate of the US dollar in 2018.
"We have seen the rally of the US $ 39. erase, perhaps helped by positioning Supporting this thesis of market positioning of the markets, the CHF was the best performing currency of the G10 despite the risk, and the CHF is the shortest position in the G10 ", says James Lord, another strategist at Morgan Stanley
The performance of the Swiss franc against other currencies last week suggests a possible reversal of position in the market, which would be consistent with the change in Khoo's Global Growth Dynamics
Institutional fund managers have thrown tons of money behind US dollar bets in recent months, taking the net total "measured" by the data ] more than 44.4 billion d ollars last week.
This is the highest level since the aftermath of President Donald Trump's victory in the 2016 US elections and is equal to 83% of the maximum of the past three years. According to Morgan Stanley's Khoo, a combination of a US slowdown and faster growth outside the United States could soon cause further pressure on the greenback.
That's exactly what drove the US currency to an annual loss in 2017, when economic growth in the eurozone was strong by the end of the first half, as US economists The US slowdown occurred when the growth situation was blurred by a series of hurricanes that struck in the summer.
Above: Daily pound-dollar rate
"Fundamental forces continue to suggest that the USD is a currency of financing, which implies a negative correlation to risk and macroeconomic performance in the Rest of the World, "says Lord." Our four-factor USD dashboard continues to indicate that the current USD recovery is faltering. around mid-August. "
The Dollar Index fell 10% in 2017 and fell by 4% in the first quarter of 2018 as to reverse these losses in April when it appeared that the The global economy had slowed during the first three months of the year.The quarterly growth of the euro area rose from 0.7% at the end of 2017 to only 0.4%, while growth UK GDP decreased by 0.2% Friday, July 27, the Dollar Index converted a 4% loss in 2018 into a gain of 2.8%, the Investors were betting that higher levels of US growth would allow the Federal Reserve to continue to grow at a time when central banks in Europe, the United Kingdom and elsewhere were likely to remain stuck.
"We doubt that investors' assessment of the outlook for monetary policy in other major advanced economies will change much this year, which means that relative interest rate expectations should generally be favorable to the dollar. ", says Oliver Jones, economist at Capital Economics . "With this in mind, we doubt that the dollar is abandoning the gains it has made earlier this year until 2019".
The Bank of England is expected to raise its interest rate for the second time since this year's financial crisis. week, although the markets are doubtful, he will follow this move with another shortly after. The Fed is expected to raise rates in September and December, bringing the Fed Funds rate to 2.5%, the highest in the world developed by a mile across the country.
The European Central Bank reiterated last week that its interest rate will remain at its lowest level for some time and that markets doubt that the BoJ will make significant changes to its monetary policy in a near future. to come up. Then we think that the recent strength of the US economy has begun to decline, ending the Fed's tightening cycle earlier than expected by investors, and that by then, the central banks of the US have other major advanced economies will probably be doing so. Expectations on relative interest rates are likely to begin to move closer to the dollar, "says Jones.
Above: Dollar to Dollar rate quoted at daily intervals.
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