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.



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

Live Webinar

Live Webinar Events


Economic Calendar

Economic Calendar Events

Free Trading Guides
Please try again
More View more
US Dollar Fundamental Forecast: Downtrend to Resume Course as Stocks Climb?

US Dollar Fundamental Forecast: Downtrend to Resume Course as Stocks Climb?

Daniel Dubrovsky, Strategist

US Dollar Fundamental Forecast: Neutral

  • US Dollar downtrend resumed course as the S&P 500 climbed
  • Lower liquidity leaves Greenback in a position to capitalize on
  • Favorable ‘risk-on’ environment also leaves USD vulnerable
How to Use IG Client Sentiment in Your Trading
How to Use IG Client Sentiment in Your Trading
Recommended by Daniel Dubrovsky
How can trader positioning influence price trends?
Get My Guide

The anti-risk US Dollar resumed its broader downward trajectory this past week, and remains at risk to continue doing so. This has left the Greenback near lows set at the start of this year against its major counterparts. Demand for the world’s most liquid currency faltered as sentiment recovered in global financial markets. The S&P 500, FTSE 100 and Nikkei 225 charged higher alongside shares in Emerging Markets.

There was also the continuation of steady gains in longer-dated Treasury yields, with 30-year rates at highs from February 2020. Economic recovery bets and rising inflation expectations have also been pushing breakeven Treasury yields upward. The 10-year one is hovering around 2018 peaks, having briefly touched the highest since 2014. Disappointing core US CPI data was brushed aside as markets traded into the weekend.

The week ahead is cut slightly short on Wall Street due to the Presidents’ Day holiday on Monday. This is as stock exchanges in China and Hong Kong are offline for the Lunar New Year. As such, reduced liquidity conditions could open the door to higher-than-normal volatility in financial markets given breaking developments. That could leave the Greenback in a position to capitalize on should volatility strike.

Focusing on the economic calendar, the US will release January’s retail sales print. Following a 0.7% m/m contraction in December, purchases are expected to increase 0.8%. Industrial production for the same period will also cross the wires on the same day. Then, FOMC minutes may reiterate the central bank’s accommodative setting, without an urgency to do more beyond current paces in quantitative easing.

The latter may be something that could continue disappointing investors, but the focus lately has and will likely be on fiscal stimulus. US President Joe Biden seems to be aiming to deliver around US$1.9 trillion in relief through budget reconciliation given a lack of Republican support in the Senate. This may continue boosting longer-dated government bond yields, potentially bullish for USD. But, the Fed’s dovish stance remains supportive to a ‘risk-on’ environment, leaving the Greenback vulnerable as well.

Introduction to Forex News Trading
Introduction to Forex News Trading
Recommended by Daniel Dubrovsky
What does it take to trade around data?
Get My Guide

US Dollar Versus Treasury Yields and Risk Appetite

USD vs. Treasury Yields vs. Risk Appetite

Chart Created in TradingView

--- Written by Daniel Dubrovsky, Strategist for

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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