Skip to Content
News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
Gold
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View More
US Dollar May Rebound as Financial Markets Face Global Recession

US Dollar May Rebound as Financial Markets Face Global Recession

Ilya Spivak, Head Strategist, APAC

US DOLLAR PRICE FORECAST: BULLISH

  • US Dollar driven by cash demand amid global recession worries
  • New Fed FIMA repo scheme unlikely to revive economic growth
  • FOMC minutes, US CPI and consumer confidence reports due

US Dollar price action has been animated by a single theme in recent weeks. A rapid contraction in global economic growth amid nearly worldwide lockdown to contain the Covid-19 outbreak has echoed in a rush for cash as capital flees comparatively riskier cyclical assets in search of safety and liquidity.

The indisputably dominant reserve currency has understandably thrived against this backdrop, paying no mind to exuberant Fed monetary stimulus that might have otherwise sent it reeling. The week is likely to remain consumed with the same narrative as the pandemic continues to burn hot.

US DOLLAR MAY RISE DESPITE NEW FED SCHEME TO EASE CASH SHORTAGE

The tone for what’s to come may well depend on whether the Fed’s new FIMA repo facility is well-received when it opens for business Monday. It allows foreign central banks to temporarily flip their holdings of US Treasuries into cash, creating a vast stop-gap liquidity supply to keep credit markets lubricated.

The Greenback will probably retreat if this is successful as scarcity risk abates. However, even the promise of open-ended QE has only managed to stop the surge in short-term lending rates. The Fed’s new tool may fare in kind: it is a useful backstop that helps prevent a credit crunch, but it is unlikely to revive growth.

This is because cheap capital and subsidized purchasing power cannot be deployed in earnest while whole nations are huddling behind closed doors. Containing the virus is almost certainly a prerequisite. That means credit markets are likely to remain stressed, undermining the Fed’s efforts and keeping USD supported.

Traits of Successful Traders
Traits of Successful Traders
Recommended by Ilya Spivak
Traits of Successful Traders
Get My Guide

US CONSUMER CONFIDENCE AND INFLATION DATA, FOMC MEETING MINUTES DUE

On the data front, the University of Michigan gauge of US consumer confidence is projected to put sentiment at the weakest since November 2013. March CPI inflation data is expected to drop to 1.6 percent on-year, marking a nine-month low. Soft outcomes may encourage haven-seeking US Dollar buying.

Minutes from the Fed’s emergency meeting on March 15 are also of note. Markets will carefully parse the document to understand the thinking that drove policymakers to throw the stimulus taps wide open when they did, hoping that this will inform a framework for forecasting future action.

Starts in:
Live now:
Dec 19
( 03:12 GMT )
Recommended by Ilya Spivak
Cross-Market Weekly Outlook
Register for Webinar
Join Now
Webinar Has Ended

--- Written by Ilya Spivak, Sr. Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

US DOLLAR TRADING RESOURCES

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES