According to analysts, the fantastic stability of the US currency is a little threatened. Currently, the dollar is at the peak of positivity as it continues to show steady growth. However, there are factors that can shake the leadership of the greenback and even knock the soil from under his feet.
Experts attribute the upcoming presidential election in the United States to potential drivers of the USD decline. The results of which will decide the future direction of the American economy and the dynamics of the dollar. According to preliminary estimates by Peter Schiff, an expert in the precious metals market, if Democrat Bernie Sanders wins, the US economy will plunge into chaos and the price of gold will skyrocket above $2000.
Schiff iterated that the election of Sanders to the presidency of the United States will entail an increase in the budget deficit, and the Fed will once again launch a printing press. This is necessary to finance projects requiring serious cash injections. Schiff is confident that in the 2020 fiscal year, the US federal budget deficit will exceed $1 trillion as previously, this happened on the eve of the global crisis of 2008, he emphasized. Currently, Sanders has strengthened his position in the presidential race, reducing the gap from his rival, Joe Biden, by only 3%. According to a Fox News poll, a Democrat leads the rivalry with Donald Trump, gaining 48% of the vote against 42% of the current president.
Schiff reassures that if Sanders wins, the greenback will lose the status of a reserve currency. The protective properties of the dollar, which provide it with the status of an asset-refuge, will also be called into question. In such a situation, the Fed will have to rethink the current policy and, possibly, radically change it, analysts say. Recall that at the moment, the Fed has kept interest rates unchanged, emphasizing that in negative circumstances it is ready to revise them. Jerome Powell, the head of the regulator, noted the relatively stable growth rate of the US economy, a growing labor market, high employment, and moderate unemployment. He also drew attention to the inflation rate, which was close to the target of 2%. According to Powell, the current monetary policy does not need to be reviewed and provides stable economic growth in the United States.
Confirmation of the words of the head of the Fed was the macroeconomic statistics released in the United States on Thursday, January 30. This document is the US GDP report for the fourth quarter of 2019. Many experts believe that he is able to change the direction of movement in the market. According to the report, the US GDP growth was 2.1%, which exceeded analysts' forecasts. The current situation gives the dollar advantage in the pair EUR / USD, and the euro, on the contrary, plunges into confusion.
Recently, the European currency is difficult to determine its future dynamics. Experts say that the direction of its movement is unstable and more often inclines towards a downward spiral. Not too positive reports on the Eurozone labor market added fuel to the fire. According to current data, in January 2020 the number of applications for unemployment benefits in Germany fell by 2,000 after the explosive December growth of 8,000. However, this relatively good news, as reducing unemployment in the eurozone to 7.4%, had almost no effect on the market. At the beginning of this year, consumer confidence in the eurozone also worsened, experts emphasize. In addition to this, economists iterated that the current situation puts significant pressure on the dynamics of the euro.
On Thursday, January 30, the pair was in a downward trend plying near the 1.1012 mark. However, the tandem was able to turn the tide as later on, it started to move up. During the day, the pair rose to 1.1023–1.1025, and started the following day from these positions.
On Friday, January 31, the EUR / USD pair is trading near 1.1026–1.1027, trying to go beyond this range. However, it's not possible to go far, and the tandem is still treading water, trying to get out of narrow borders.
According to experts, in the short and medium-term, the dollar will maintain positive momentum. At the moment, the greenback has reached a two-month high against a basket of major currencies. USD support is provided by the time-tested status of a defensive asset. According to experts, the US dollar is the leader in January among the currencies of the Big Ten (G10). Analysts are confident that, despite possible difficulties, the greenback will maintain this status and strengthen its position.
