The American currency has recently been under the eye of both the whole world and the national regulator. The Fed has repeatedly tried to weaken it, but the leading asset, time-tested and with a strong global support, is still getting away with it. Thus, experts believe that the current weakening of the greenback, recorded after the third rate cut by the fed – is a temporary phenomenon, and in the future, a rise is worth expecting.
Despite a number of negative forecasts related to the Fed rate cut, the dollar remains stable. On Wednesday, October 30, most analysts expected it to weaken. Indeed, the greenback sank significantly after the Fed reduced its rate by 25 basis points (bp). However, many experts also believe that the potential rate cut was laid down in the dynamics of the "American", so it did not come as a shock to them.
In addition, the amazing inflexibility and superstability of the dollar causes the genuine amazement of currency strategists. Earlier, the greenback maintained its position, despite the July and September cuts in Fed rates. According to experts at Columbia Threadneedle Investments, the USD will further strengthen against the euro in the next three to six months. They do not exclude the possibility that the "American" will reach parity with the European currency for the first time since 2002.
The current market situation, however, is in favor of the euro. On Wednesday, the pair EUR / USD recorded the growth of the European currency against the American one. On Thursday morning, October 31, the euro lost ground slightly. Now, the pair traded within the range of 1.1165–1.1166, demonstrating a tendency to a smooth decline.
According to experts, a single European currency took steps to increase at the beginning of the week. This was facilitated by increased risk appetite on world markets and optimism associated with progress in US-Chinese negotiations. The "European" was supported by the current Fed rate cut, but, contrary to the gloomy forecasts of a number of analysts, it did not drown the dollar, but only slightly weakened the world's leading currency.
On the other hand, at Columbia Threadneedle Investments, they are confident that three factors will support the greenback this quarter: the Fed's high rate, high inflation in the United States and significant economic growth in the country. Analyzing what was said, experts argue that the rate in the United States, despite yesterday's decrease, is still higher than in several countries. Secondly, domestic inflation in America is much more stable than in Europe. As for the third factor, against the backdrop of a slowdown in global economic growth, the US economy looks more full-blooded than other countries.
According to analysts, the dollar usually moves in sync with the key rate, that is, falls when it decreases, but in reality, any options are possible. It happens that a greenback behaves unpredictably. Experts believe that this is exactly the case now, and the dollar can radically change its direction.
Moreover, many experts, agreeing that the dollar is supposed to weaken along with the Fed rate cut, are adjusting for the current situation on the other side of the Atlantic. Currently, this theory is breaking down into economic and political instability in the rest of the planet. World central banks, in turn, make harsh and atypical decisions, and more often, negative rates and weakening currencies start to appear. Against this background, the US dollar looks like an island of calm and reliability, which is preferred by the lion's share of investors. Many people compare a greenback with an unshakable rock that is not afraid of financial storms - on the contrary, they temper it.
Despite the fact that the "American" is overrated, support is provided by unresolved geopolitical crises. As long as they exist, the dollar will strengthen, analysts are sure. Some of them believe that the American currency is approaching its peak or has already overcome it. However, most currency strategists are sure that waiting for the weakening dollar is pointless, while the situation in Europe leaves much to be desired. At the moment, the "American" feels confident in relation to the Mexican and Colombian pesos, as well as to the Brazilian real, using the Swiss franc for financing along with the Australian and New Zealand dollars. Together with the European currency, the greenback still feels superior. On Thursday, the EUR / USD pair was trading in the range 1.1159–1.11160, having slightly lost its optimism during the morning.
At the moment, the pair went on the offensive, returning lost ground. The pair EUR / USD quickly turn between 1.1163-1.1164.
There is little that can prevent further strengthening of the dollar, experts are sure due to the fact that greenback is supported by strong economic growth in the United States. To ensure it in 2020, a combination of a number of factors will be required, analysts say. These include stable growth in consumer spending, low rates, a moderately strong dollar and a competent fiscal stimulus policy in the United States, Europe or China.
As a result, the American currency can surprise even seasoned experts and market participants. Many expect surprises from it, and more often with a plus sign than a minus. This is largely due to the high growth rates of the American economy, which, despite the signs of a slowdown, are still ahead of other developed countries. Thus, this creates the prerequisites for maintaining demand for US assets and the dollar, experts conclude. At the same time, they are sure that the greenback will be able to turn 360 degrees at any moment, and its dynamics cannot go in the direction that most analysts predict.
