Second waves of COVID-19 are set to stall USD depreciation through the first half of 2021. Therefore, economists at CIBC forecast the US Dollar Index (DXY) at 92.50 in the first half of the next year.
“With second waves of COVID-19 still spreading, USD depreciation could stall as its safe-haven currency status is restored into the early months of 2021. Indeed, the greenback will see inflows as the winter months prove particularly challenging in terms of keeping a lid on covid cases. It won’t be until closer to mid-2021 when mass vaccination starts to become a reality, and the USD unwinds gains.
“A failure to pass a new stimulus bill could push the Fed into a more aggressive stance on QE, a potential negative for the greenback, but we’re assuming that a moderately scaled fiscal package will be approved by Congress in either December or soon after the January inauguration.”
“So far, the US economy has remained resilient, but it’s likely that the impact of the second wave reveals itself in the months ahead and in early 2021, as data is showing signs of turning. That could keep risk appetites contained and lift the USD. Progress on vaccine distribution towards mid-year could help shift the narrative to a risk-on environment, with the USD giving up any risk-off gains.”
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.