US Dollar rally 2017 outlook: New life under Trump?


Since the new administration has taken over control, the greenback is experiencing a lot of volatility. What can we expect on the long-term? Has the US Dollar rally 2017 outlook changed?

6 February, AtoZForex The US dollar might have lost some steam recently, as it slid from 14-year highs. However, market analysts believe that the currency will most likely soon be on top again.

US Dollar rally 2017 outlook: New life under Trump?

The dollar index, which is measuring the US dollar versus a basket of six major currencies, went up as much as 103.82 at the beginning of the current year. Since then, the index dropped as low as 99.233.  In the middle of January, the acting US President, Donald Trump has stated that the US dollar was “too strong”.

These remarks have weighed on the greenback. Other factors involve the start of the implementation of Trump’s policies. Since taking over the White House, Mr. Trump has started the execution of his promises. He has already inked the order to revise the Dodd-Frank act, implemented the immigration ban, and withdrew the US from the Trans-Pacific Partnership. Some of these protectionist policies have further weakened the US dollar. Yet, the currency has stayed strong. The chief Asia market strategist at JPMorgan Asset Management, Tai Hui, has stated:

“President Trump can tweet all he wants but many of his policies are fundamentally supportive of the U.S. dollar. If you think about protectionism, if you think about immigration policy, if you think about his pro-growth fiscal policy, all of these are supposed to raise inflation and therefore raise interest rates and supposedly raise the dollar.”

What will happen to the greenback in 2017?

Some other analysts are also expecting the USD to appreciate more in 2017. The foreign exchange strategist at CIBC, Patrick Bennett, has stated that he expects the greenback to stay strong due to the well-performing US economy. He has stated:

“Quite clearly the U.S. economy is doing ok.”

On Friday, the US data indicated that the US nonfarm payrolls gained 227,000 in the past month. The US unemployment rate increased to 4.8 percent, in comparison with the market consensus with 4.7 percent. Mr. Bennet has added:

“The Federal Reserve will be raising rates further this year. We think the market probably underprices what the Fed is going to do.”

Some analysts were not as sure about the Fed reaction to NFP. On Monday, the Singaporean multinational banking and financial services corporation, DBS, has noted that US wage growth slowed in January. The overall advancement of the wage levels came at 2.5% year-on-year. Moreover, the bank stated that the central bank might consider hiking the interest rates at a slower pace:

“Trump tweets put many on edge and the uncertainty is bound to translate into a more cautious Fed.”

According to DBS, in order for the US dollar to appreciate in the short-term, markets would need to push the forecast for the next rate hike from June to March.

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