The spread of the Delta variant has challenged the US economy, fuelling the idea that the Federal Reserve (Fed) may delay tapering. This potential delay could weigh on the USD, albeit temporary, in the view of economists at HSBC. They expect the USD to strengthen gradually, due to the slowdown in global growth and the Fed’s path towards normalisation.
A potential delay in tapering would weigh on the USD, albeit temporary
“COVID-19 in the US has been challenging lately, and that has been cited as a near-term downside risk by the Fed. Indeed, the US economy is losing some speed. All this fuels the idea that the Fed may delay tapering.”
“A potential delay in the slowing of the Fed’s balance sheet would test the USD, although we believe it would be temporary. Once the spread of the Delta variant shows a sign of peaking then the Fed would presumably resume its path towards gradual normalisation.”
“We still believe the USD is gradually transitioning to a stronger path for two key reasons. First, global growth may be losing speed but is not seen as decelerating quickly. If we believed the latter could occur, then we would factor in a much steeper USD climb. Second, the Fed is edging closer towards eventual rate hikes, which should support the USD, especially when tapering actually starts.”
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.