Don’t be fooled by the pullback in the U.S. dollar today because the greenback could still strengthen further before the end of the year. Nearly all of the major currencies rebounded because of local factors and not a shift in appetite for U.S. dollars or change in economic fundamentals. There’s been no data so far this week and stocks consolidated after yesterday’s slide. The strength of USD/JPY, which is hovering around 114 and near 1.5 year highs is a confirmation of the dollar’s dominance. To answer the question of whether the dollar will get stronger, we have revisit the 4 main reasons why its been rising this year.
4 main reasons why the dollar keeps getting stronger
1. Good Data
2. Rising Interest Rates
3. Equity Market Pressure
4. Trade Policy
Three out of four of these factors will still draw investors into the greenback.
Rise of the USD – How high can it go with. Watch the clip on CNBC
Got the chance to appear on CNBC World Wide Exchange with Sara Eisen this morning talking about my Targets for GBP, USD/JPY and comments on EURO Watch Now. Lots of Good Stuff.
The Reserve Bank of Australia meets tonight and new central bank governor is at the helm. Phillip Lowe, former RBA deputy governor succeeded Glenn Stevens and investors will be paying close attention to the new governor’s tone. Chances are he is going to play it safe and maintain the central bank’s upbeat outlook. The last time they convened they expressed confidence in the trend of growth and labor market. When Lowe spoke last month, he said the labor market is not as strong as the unemployment rate suggests and inflation is expected to remain low for some time. Taking a look at the table below, there has been as much improvement as deterioration in Australia’s economy since the last monetary policy meeting with broad improvements in China. So while RBA Governor Lowe may be optimistic, the main takeaway will be patience. AUD may fall on this but at a time when the central banks of the U.K., Eurozone, Japan and New Zealand are considering more stimulus, a neutral bias will make any declines shallow. In fact we believe the better trade is to be long AUD pre-RBA.
Watch this clip for my views on how to trade the dollar into the Presidential debate