Will The US Dollar Weaken?

[Djamel Brahimi]

[Guest Sam Bouman]

For a long time now the US dollar bulls have not weakened and we have continued to see a sustained up move in the US dollar. There has been a slight wobble as of yesterday but again today we have seen it strengthen once more.

The question is will we see it weaken, to determine this we have to look at the fundamentals regarding the economy in the USA. Firstly we have the obvious issue of the trade war, at the moment it doesn’t seem as though there is any clear end in sight with escalations on both sides which could eventually lead to a breakdown in talks BUT we are not there yet. However the trade war has a global impact economically which leads to investors looking for safe havens, one of those safe havens being the US dollar. This means we will see a further increase in the price of the currency. 

So what would we need to see for the dollar to weaken. The main thing that would see the dollar weaken is a rate cut, at the moment it is looking increasingly likelier that this may happen with stock markets dropping and the fed rhetoric sounding ever more dovish. Also this would be exactly what Trump wants as he is constantly pressuring the fed to cut rates. On top of this we are hearing rumours regarding more USD liquidity coming into the markets which would certainly contribute to some USD weakness.

I believe that the USD will remain strong for now and will we will only see some weakness once either of the two scenarios above occur.