Analysts Predict Resurgent Dollar to Remain Strong in Coming Months
Foreign Exchange Strategists Predict Strong Dollar Amidst Potential Rate Cuts
A recent Reuters poll of foreign exchange strategists suggests that the resurgent dollar is likely to maintain its strength in the coming months, as markets reassess the potential timing of interest rate cuts by the Federal Reserve. This prediction comes as the dollar gained nearly 2.0% in January, following clear indications from the U.S. central bank that early rate cuts are unlikely.
U.S. Jobs Report and Central Bank Policies Influence Dollar Performance
The prediction of a strong dollar is supported by the blowout U.S. jobs report for January and statements from various Fed officials, reducing the likelihood of early rate cuts. The latest data from the Commodity Futures Trading Commission also shows a trend of currency speculators paring their short dollar bets, further reinforcing the potential for a strong dollar.
Major Economies Expected to Lag Behind U.S. Growth
With growth in most major economies expected to lag behind the U.S., and rate differentials favoring the dollar, analysts believe it will be challenging to dethrone the dollar in the short-term. However, the median forecast among strategists still suggests a weakening dollar against most major currencies in the next three, six, and 12 months.
Debate Over Fed Easing and Currency Performance
Analysts discuss the debate over the potential actions of the Federal Reserve and other central banks, with some suggesting that the risks are skewed towards less Fed easing and, therefore, in favor of the USD. This debate influences the outlook for major currencies, with the euro and Japanese yen forecasted to strengthen against the dollar in the coming months.
Consistent Median Views on Major Currencies Since December
The median views for most major currencies remain consistent since December, indicating a stable outlook despite the potential for a strong dollar. Overall, the consensus among foreign exchange strategists points towards a resilient dollar amidst global economic and policy uncertainties.
For other stories from the February Reuters foreign exchange poll:
