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US Dollar's Bull Run to Die Down Within Three Months: Reuters Poll

US Dollar’s Bull Run to Die Down Within Three Months: Reuters Poll

Posted Friday, July 2, 2021 by
Aiswarya Gopan • 2 min read

Even as the US dollar enjoys its moment in the limelight ahead of the latest NFP report and amid a cautious mood about global economic recovery in the wake of the latest resurgence of COVID-19 cases across the world, a recent Reuters poll forecasts that it may lose its sheen within a year’s time. On a positive note, however, the near-term outlook for the US currency remains strong, especially on the back of the Fed’s latest hawkish observations in June’s FOMC statement.

After weakening through two consecutive months, the Fed’s latest meeting helped the greenback end June on a high note, strengthening by around 3% against other major currencies. This was the best monthly performance seen in the reserve currency in over four years.

In addition to the hawkish tones of Fed’s policymakers lately, indicating an interest in tightening monetary policy and tapering off stimulus sooner than planned, the US dollar’s safe haven appeal has also received a boost over the spread of the delta variant around the world. Several countries, especially across Southeast Asia are under the effect of the latest wave, forcing them to bring back lockdowns and restrictions which could hamper global economic recovery.

Over the course of the next three months, around 75% of analysts polled by Reuters recommend going long on the dollar and taking short positions against its major peers. However, not too many of the respondents feel that the bullish wave can sustain for too long, with over 58% indicating that it could last less than three months.

Once the Fed’s hawkish mood gets priced in by the markets, it is highly likely that investor focus will shift towards other currencies in the coming months, weakening the reserve currency’s appeal. Analysts are especially buoyant about the prospects of the Euro in the long-term, expecting EUR/USD to gain as much as 2.6% over the coming year to trade at around $1.22.

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