Avery Shenfeld and Taylor Rochwerg, analysts at CIBC, point out the March FOMC meeting provided clarity concerning the Fed’s 2019 outlook, which included a downgrade in growth prospects and a potential rate hike pushed back into 2020, lending to near-term DXY weakness. They forecast DXY at 94.3 in Q2 2019 and at 92.1 by Q4. 

Key Quotes: 

“Last week’s FOMC meeting saw the Fed backing away from rate hikes this year, and we now see the next move as a mid-cycle, quarter point ease in 2020. Although the US will still outpace other economies in terms of growth, given its current account deficit, it’s the US that needs steady capital inflows to maintain an exchange rate at a steady level. A no-change rate stance by most countries in 2019 should play towards a gradual erosion in the dollar’s earlier gains."

“A calming in crisis waters could also play into a softening in DXY. Thawing trade tensions between China and the US suggest that investors will reduce their dependence on DXY as a fail-safe, thereby restricting upside potential for the currency. In addition, while its all still up in the air, as long as the UK avoids the worst in the Brexit process (i.e. we don’t have a hard, no-deal exit), the reduction in uncertainty surrounding Brexit will strengthen sterling.”

“The US current account gap hasn’t improved at current exchange rates, despite America getting closer to being a net exporter of oil. The wind down from earlier fiscal stimulus will actually help that balance, by reducing the growth in US import demand. But at the same time, the reduced fiscal stimulus, and a marginal tightening in fiscal policy in 2020, is key to soft track for the Fed on monetary policy, and it’s that development that should promote a weakening DXY in the mediumterm.”

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.

Feed news

Latest Forex News

Editors’ Picks

EUR/USD: Double bottom breakout fails ahead of the Fed

The bullish case for EUR/USD has weakened ahead of the FOMC (Federal Open Market Committee) rate decision due this Wednesday. The currency pair closed well below 1.1263 on Friday, invalidating the double bottom breakout confirmed on June 6.


GBP/USD consolidates the downside near 1.2600, UK politics in spotlight

Given the lack of data/events at home and abroad, political plays ahead of Tuesday’s another round of voting to select Tory leader will gain major market attention for fresh impulse.


USD/JPY wavers in range near 108.60 amid risk-on

USD/JPY failed to sustain at higher levels once again and returned to the familiar range around 108.60 amid mixed Asian stocks while higher US equity futures and Treasury yields help keep the minor bids intact ahead of Fed.  


Gold: 100-month MA is a level to beat for the bulls

Gold (XAU/USD) is struggling to cut through key technical line which proved a tough nut to crack in 2018. The yellow metal rose to $1,358 on Friday, but the break above the 100-month MA.

Gold News

Trade War With India Starts: How Trump is Winning the Global War in 10 Tweets

After a year of talks on U.S. barriers to Indian steel and aluminum, India retaliates against Trump. The Hindu reports India to Impose Retaliatory Tariffs on 29 U.S. Goods Starting June 16. 

Read more