During recessions, the dollar is usually used as a safe-haven and appreciates against the euro. This was not the case during the COVID crisis and analysts at Natixis believe that a depreciation of the dollar is now the most likely scenario.
“Monetary policy during the COVID crisis was even more expansionary in the United States than in other OECD countries.”
“The euro zone now intends to use its savings surplus to finance investments in the euro zone, with European investment funds borrowing this surplus instead of lending it to the rest of the world, particularly the United States.”
“The new economic policies that Joe Biden would implement if elected president (increased taxation of capital gains, corporate earnings and wealth; federal minimum wage doubled to $15 per hour, restrictions on oil and gas production) could discourage non-residents from buying US equities.”
“When there are capital outflows from emerging countries, which was the case at the beginning of the COVID crisis, the dollar is supported, which can also be seen from its appreciation against emerging currencies. But since mid-May 2020, these capital outflows have stopped and emerging currencies have appreciated again, which is negative for the dollar against the euro, for example.”
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.