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Saturday 16 September 2017

Why the dollar will rise? (3)

This is in an environment of expected normalization of the interest rate policy of other central banks around the world. At its meeting on Thursday, the British Central Bank hinted at a very recent rise in interest rates. The ECB is also expected to do so at its next meeting in October. As we all know, expectations are traded on the financial markets.
The point is that a weak dollar is likely to start generating an accelerated rise in US inflation. And this will cause investors to start expecting the Fed to continue raising interest rates.
Finally, investor expectations are overestimated against the US dollar. According to 44% of market participants, the dollar will continue to fall cheaper. And this is one of the most serious indicators that the dollar may rise.

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