US Dollar likely to depreciated in 2021 as real interest rates are kept negative – NFB
|The US dollar is more likely to be driven by real than by nominal interest rates in the months ahead, and the Federal Reserve seems intent on keeping real interest rates negative for longer, argue analysts at the National Bank of Canada.They forecast EUR/USD at 1.24 by the end of the fourth quarter and at 1.19 in about a year.
Key Quotes:
“The broad index of USD strength rose for a third straight month in March. This latest bout of appreciation came mostly from gains against the currencies of other developed economies. It can probably be attributed to speculators covering bearish positions on the greenback after Washington signalled another fiscal stimulus package, leading market participants to see increased odds of higher U.S. interest rates. In our own outlook, the Fed seems intent on keeping real interest rates negative for a while longer and, to this end, will not taper its quantitative easing anytime soon. Our scenario remains one of USD depreciation in 2021 as real interest rates are kept negative.”
“Mr. Powell’s statement accords with our own current view that U.S. quantitative easing and negative real rates will be with us for the foreseeable future in order to keep financial conditions pro-growth. This backdrop, together with a swelling twin deficit (current-account and fiscal), argues for renewed USD weakness in the months ahead.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.