This week, the dollar against major currencies is likely to see its first decline in seven weeks, the worst week since early February.
As weak employment data exacerbates concerns about the recession, the yield on U.S. bond fell, and the dollar fell nearly 1% on Thursday, hitting a new low in the past two weeks.
data shows that the number of first-time unemployment benefits in the United States unexpectedly increased by 21,000 last week, to 218,000 after seasonal adjustments, the highest since January, which may imply that demand for workers has cooled as the financial environment tightens.
In the past 14 weeks, the index has recorded an increase except for two weeks, and has risen 7.5% this year. So far, the index has fallen 1.4% this week.
USD can’t rise?
USD hit a nearly 20-year high last week, with the Federal Reserve hawkish position, rising demand for safe-haven since the Russian-Ukrainian conflict, and the US economy performing better than that of countries such as Europe, all bringing a boost.
However, the recent impact of high inflation on the US economy is increasingly showing.
Zach Pandl, co-head of foreign exchange strategy at Goldman Sachs, pointed out in his report this week that the US dollar is currently "significantly overvalued" about 18%. Although the US dollar usually strengthens when it is approaching a recession, once enters a recession, betting on the US dollar will not work.
The bank expects that the dollar will have two possibilities in the coming weeks: if the global economic growth outlook improves, the dollar will weaken as investors turn to high-risk assets; if the global economy falls into recession, the dollar's outlook will be even more bleak.
Some analysts also said that the weakening of dollar partially reflects the recent decline in inflation-adjusted U.S. Treasury yields, but they are skeptical about whether the dollar will fall.
Reuters quoted Societe Generale Forex strategist Kenneth Broux, said:
"This has raised questions about whether the momentum of the dollar's rise has been exhausted. But it is too early to say that the dollar has peaked. "
Broux said that if there is evidence that the economic strength of regions outside the United States, especially Europe and China, is strengthened, the dollar may weaken in the long run.
Previously, Zhang Jingjing of Western Securities was in "Where is the top of the US dollar?" 》 The article analyzes that:
The appreciation of the US dollar index since this year is not the result of the Federal Reserve hike rate and balance sheet reduction , but more of it is not the United States.
Looking back, the fundamentals of the US economy are likely to show signs of significant decline in Q3, and even the unemployment rate is very likely to begin to rebound from August to October this year. In addition, the US inflation center will drop significantly by then (for example, from the current 8.3% drop to the 4-5% water level), then the Fed is expected to "consider" end the rate hike at that time. China's economy will also rebound in Q3. Under resonance, the US dollar index may peak by then, and this is very likely to be the end of this round of US dollar appreciation cycle, and then enters a depreciation cycle.
But it is worth noting that the Federal Reserve officially began to shrink its balance sheet in June. As liquidity continues to tighten, global equity assets and market risk preferences may face the last test, and the US dollar may have the last bounce at that time.
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