US Dollar Still Weak – Fed’s Dovish Plans, Uncertainties in Economic Outlook Weigh

The US dollar is starting the fresh trading week on a bearish footing, extending its weakness from the previous few sessions despite the Fed

Aiswarya Gopan•Monday, May 24, 2021•1 min read

US Dollar Still Weak - Fed's Dovish Plans, Uncertainties in Economic Outlook Weigh

The US dollar is starting the fresh trading week on a bearish footing, extending its weakness from the previous few sessions despite the Fed policymakers alluding to the possibility of tapering bond purchases in their most recent meeting. At the time of writing, the US dollar index DXY is trading around 90.02, close to the lowest level seen in three months.

The weakness in the greenback has been driven over rising concerns about the Fed’s plan to extend its monetary easing and low interest rates for a longer period of time even as the US economy posts a faster than expected recovery. On the other hand, other major peers like the central banks of the UK and Canada have already signaled their interest in starting the process to ease support.

Economists are also concerned that the pace of economic recovery in the US could be slowing down, especially with retail sales showing signs of easing. The economic outlook for the US still faces considerable uncertainties, and risks remain tilted to the downside despite the US rolling out COVID-19 vaccine rapidly. External risks that can harm exports, supply chain disruptions, the possibility of another wave of the pandemic across the nation, are only some of the risks that weigh on the economic outlook in the coming months.

Meanwhile, the Euro has benefitted immensely from the weakness of the US dollar, surging to a near-three month high. However, it has eased slightly lower after the ECB President stated that it was still too soon to consider withdrawing monetary support for the Eurozone economy amid ongoing uncertainties to the outlook.

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ABOUT THE AUTHOR See More

Aiswarya Gopan

Financial Writer & Editor - Asia & Europe Desk

Aiswarya Gopan is a former cybersecurity analyst, tech journalist and market researcher, who joins FX Leaders with over three years of experience in the blockchain industry. Aiswarya's areas of focus include market news out of the Asian and European markets as well as news coverage on cryptocurrencies.