The US dollar appreciates in recessions – Natixis

FXStreet Team FXStreet

Many analysts have raised the possibility of the dollar depreciating in the future against the euro, but also against other currencies. Economists at Natixis examine the variables that seem to have heavily influenced the dollar’s exchange rate.

EUR/USD has reached levels last seen in 2018, not far from that year´s peak at 1.2554. The pair has turned bullish after breaking above a descendant trend line coming from 2008 and points to 1.2750.

Key quotes

“We clearly see a negative correlation between the yield spread (United States-Europe) and the dollar’s exchange rate against the euro and a positive correlation between the ratio of the monetary bases (United States/eurozone) and the dollar/euro exchange rate.”

“We note a significant link between the yield spread (United States-world) and the dollar’s trade-weighted exchange rate (the trade-weighted exchange rate increases when the dollar appreciates); and a significant link only since 2010 between the ratio of the monetary bases and the dollar’s trade-weighted exchange rate.”

“There is no significant correlation between the growth rate gap and the dollar/euro exchange rate.”

“We see significant correlations with the expected sign between the US current account balance and the dollar/euro exchange rate and the dollar’s trade-weighted exchange rate, but no significant correlation of the right sign with US external debt.”

“We see a significant link and the expected sign between risk aversion and global growth and the dollar’s exchange rate (both dollar/euro and trade-weighted exchange rates).”

Author

FXStreet Team

FXStreet

Composed of a group of economic journalists and FX experts, the FXStreet content team produces and oversees all content published on FXStreet. It provides a purely journalistic approach to the Forex market.

EUR/USD struggles to build on recent rebound, holds above 1.1550

EUR/USD trades marginally lower on the day but holds above 1.1550 in the American session, following Thursday's rebound. The pair holds near its intraday high as the US Dollar remains pressured by hopes the Middle East conflict will soon come to an end.

GBP/USD hovers around 1.3400 as investors await war clarity

GBP/USD remains near its daily open, not far from 1.3400, in the second half of Friday's session. The US Dollar lost its previous intraday strength and weakens as investors await clarity on the US-Iran war.

Gold stabilizes above $4,200 as wait-and-see continues

After rising more than 3% on Thursday, Gold (XAU/USD) stabilized around the $4,200 mark in the American session on Friday. The US dollar seesaws between gains and losses, but remains within familiar levels as investors remain skeptical yet hopeful about a resolution to the Middle East conflict.

Crypto Today: Bitcoin, Ethereum, XRP recovery slows amid incessant capital outflows

The cryptocurrency remains in a broader corrective bias on Friday, despite majors such as Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP) holding slightly higher than early-week support levels.

SpaceX launches 24% higher at Friday debut

Space Exploration Technologies (SPCX), aka SpaceX, zoomed 24% higher soon after the start of its first IPO trading day on Friday. Shares of the rocket and artificial intelligence (AI) company founded by Elon Musk began trading at about 11:46 am EST and quickly gained speed.

4.2% headline, 0.2% core: Why the Fed's next hike may be targeting the wrong problem

May's CPI put headline inflation at 4.2% on the year, up from 3.8% in April and the hottest reading since April 2023, while core prices rose just 0.2% on the month, undershooting the 0.3% consensus and halving April's pace.