Where is USD heading?
By Paul Reid
17 October 2023
In this article, we will cover Exness opinions alongside reporting from The Wall Street Journal, which is a commercial partner of Exness.
Overall, it is difficult to say definitively whether USD will have a strong or weak future. The dollar is still associated with headlines promoting strength and stability, but a glance at EURUSD shows a rollercoaster ride between $1.05 and $1.11, and right now the price is dancing at the bottom of that range.
USD's status as the world's reserve currency remains a major factor of its strength, but that status is neither eternal nor guaranteed. If more countries join the recent trend of using their own currencies for international trade, the greenback could lose investor support.
The growing US national debt is also a major concern that may affect investor sentiment in 2023 Q4. Over the last 4 years, it has risen from $22.7 trillion to today’s $33 trillion. The current debt might already be unsustainable, which could be causing a slow erosion of confidence in the dollar.
Adding to that, the rise of China is another major factor worth considering. China may well be on a path to overtaking the US as the world's largest economy. This could lead to a further decline in USD's already shaky status as the world's reserve currency.
For traders wondering how the US dollar has remained so strong throughout 2023, the fall they might have been expecting could be just around the corner. Then again, America’s resistance to recession may continue. There’s very little to indicate which way it will go in the back end of 2023. Here’s what The Wall Street Journal has to say about it.
Dollar Momentum Might Be Fading For Now
UPDATED OCT 16, 2023 03:45 AM EDT
0733 GMT – The U.S. dollar might be losing momentum for now amid a somewhat less hawkish stance from the U.S. Federal Open Market Committee, Mark Dowding, chief investment officer at RBC BlueBay Asset Management, says in a note. “In many respects, it was surprising that the dollar failed to be lifted much by a flight to quality on geopolitical worries,” he says. With the dollar failing to gain from recent strong payrolls data, “it may be tempting to think that the trend towards a stronger dollar has run its course for the time being,” Dowding says. The DXY dollar index is trading 0.05% lower at 106.51; the EUR/USD is trading almost 0.2% higher at 1.0528. (firstname.lastname@example.org)
Investors Look to Question Sustained US Dollar Rise
0703 GMT – The dollar eases as investors are hesitant to bet on more sustained gains of the U.S. currency, analysts at UniCredit Research say in a note. “The rise in inflation expectations included in the University of Michigan’s survey for October lifted the USD across the board, but investors were still reluctant to ride a more sustained rise of the U.S. unit,” they say. Markets remain skeptical about a final rate hike by the Federal Reserve by December, with less than 50% likelihood of such a move priced, they say. Holding 1.05 and regaining 1.06 is important for EUR/USD to avoid a drop back to the year-to-date low of 1.0449. EUR/USD trades 0.2% higher at 1.0535; the DXY index is down 0.1% at 106.460.
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Paul Reid is a financial journalist dedicated to uncovering hidden fundamental connections that can give traders an advantage. Focusing primarily on the stock market, Paul's instincts for identifying major company shifts is well established from following the financial markets for over a decade.
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