At the moment, the market is witnessing another weakening of the dollar's positions. The throne under the king of the currency market is shaking, although the USD is still holding up cheerfully. However, experts fear a serious weakening of the US currency in the near future.
The focus shifted to risky instruments after the total flight of investors into defensive assets, primarily the dollar and gold. Analysts recorded a revival of risk sentiment across the entire spectrum of the market. There are two explanations for this: firstly, the situation with the removal of quarantine restrictions all over the world associated with the coronavirus pandemic (COVID-19) is gradually starting to stabilize; secondly, traders are already tired of being afraid and decided to try to increase their risk appetites. In any case, stagnation in the world market may turn out to be worse than possible losses, and its paralysis is the way to nowhere.
The US currency, despite losing many positions, is set to fight. On Tuesday, April 28, the dollar became cheaper against major currencies, but then this process stopped. MThe Swedish Krona fell the most against the dollar (by 1.52%). The reason for this was the actions of the monetary authorities of Sweden, which introduced stimulus measures to support the national economy, as well as the position of Riksbank, which kept the interest rate at zero.
According to analysts, the US dollar lost its position before the meeting of the US Federal Reserve, the results of which will be known today, April 29. Experts expect another portion of the negative from the regulator regarding the US economy, which will be an additional obstacle to the growth of USD. It is noted that most failed macroeconomic reports no longer cause outbursts of anti-risk sentiment, but put pressure on the US currency. For the European currency in the EUR/USD pair, the situation is more favorable. On Wednesday morning, April 29, the EUR/USD pair was trading near the level of 1.0854 - 1.0855, and then soared by almost 10 points (to 1.0863 - 1.0864). Subsequently, the pair lost its position a little, while the dollar did not abandon attempts to strengthen.
Recent macro statistical reports have shown an increase in negative trends regarding the dollar. For example, the April indicator of consumer confidence in the United States showed the weakest growth rate over the past six years, not exceeding 86.9 points. It can be recalled that it reached a peak value of 132 points in February 2020 and slipped to 118 points in March, and it completely disappointed the market this month.
Many economists also expect a significant reduction in US GDP - by 3.9% - 4%. Robert Kaplan, head of the Federal Reserve Bank of Dallas, agreed with them. He is confident that this indicator will drop by an impressive 25% - 35% in the first half of 2020, and these trends will strengthen in the second quarter. Goldman Sachs currency strategists adhere to this point of view. According to experts, the US economy will fall by 24% in the second quarter of 2020, and we can count on its gradual recovery in the third and fourth quarters. Goldman Sachs believes that this will put significant pressure on the dollar in the long run.
According to analysts, the state of the dollar will determine the current decline in the US economy in the first quarter of 2020. The projected drawdown of US GDP and other important economic indicators could drop USD to critical values, experts say. Currency strategists at Bank of America are betting on a negative assessment of the US economy by the Federal Reserve. They expect a rally of the dollar in the medium-term, which will be able to regain the throne in the near future. According to experts, investors will turn to safe assets again, primarily to the dollar. Experts are also sure that in such a rally, the USD will gain an advantage by beating other currencies over a long distance.
