The US Dollar Declines
The Financial Market in the United States is convinced that the Federal Reverse is about to begin an easing cycle. The majority of the market knew this was coming when the dollar rose earlier on in the year. That high is starting to decline with recent reports & indicators. The dollar has declined by 60 Points in the US Market, which has resulted in the trade-weighted dollar dropping by 2% in valuation. There are two factors as to why this has happened.
Interest Rate Differentials
The first factor is the interest rate differentials. Even though they are narrowing, at the moment they’re still wide. It’s estimated that in two years, the rates could drop by another 25 to 50bp. This will apply to dollars and rate differentials that are re-connecting. The second factor is the compelling overseas economies that are growing daily. This has resulted in large sums of money being funded and traded to these global markets.
Also, consider that this drop could resemble the Federal Reserve’s Easing Cycle in 1998. This ultimately allowed for the dollar’s growth trend to continue until 2001 when the Twin Towers were hit. If that atrocity had never occurred, who knows how long the dollars growth trend would’ve stayed. However, at that time, there weren’t other world economies competing for global currency domination. Now there is.
USD/JPY & USD/EUR 2019
It’s expected that the primary currencies that will be fighting against the US Dollar on the global stage are the CHF and JPY. These defensive currencies will continue to strengthen as the trade war between Asia & America continues to escalate. As such, it’s expected that the JPY Currency will become stronger and more viable on FX Cross Rates.
It’s too early to determine how the trade war will affect the year-end forecast for the USD/EUR Currencies. Current estimates put this currency pair at 1.15 for 1019 and 1.20 for 2020. These estimates could become better due to the prospects indicated by the European Central Banks Stimulus.
Additionally, the Great British Pound is forecasted to be considerably lower. It’s estimated that trading valuations will be at 0.92 for the EUR/GBP. This is the result of the Brexit Deadline that will come before the end of the year.