Volkmar Baur of Commerzbank points out that market pricing still expects at least one more Federal Reserve rate hike by year's end, but the ECB is only expected to make one more move to 2.5%, despite declining oil prices and weaker inflation predictions. Even while debt-financed IT investment carries risks, updated US GDP and income data support the dollar's ongoing growth.
US rates and growth support the dollar.
As we all know, the price of oil has drastically decreased since then. In the most recent instance, it even momentarily fell below the closing level of February 27, which is the level before the dispute with Iran. Therefore, it is reasonable to anticipate lower inflation, which would require less intervention from central banks.
"The market, like us, anticipates a key interest rate of 2.5% by year's end, which means another increase. The market's expectations for the Fed have not decreased, though. Conversely,
"Even though inflation forecasts have dropped dramatically over the previous two weeks and are now even lower than they were at the beginning of the year, as of today, the market expects at least one interest rate hike before year-end."
"A closer examination of GDP growth data shows that although private consumption makes up almost 70% of the U.S. GDP, it only contributed 40 basis points to that 2.1% in the most recent quarter. In contrast, the capital expenditures category's "data processing equipment" subcategory contributes more than half of the growth despite making up only 3% of GDP.
"However, that does not mean that the strength of the U.S. dollar cannot persist for a while longer."
US rates and growth support the dollar.
As we all know, the price of oil has drastically decreased since then. In the most recent instance, it even momentarily fell below the closing level of February 27, which is the level before the dispute with Iran. Therefore, it is reasonable to anticipate lower inflation, which would require less intervention from central banks.
"The market, like us, anticipates a key interest rate of 2.5% by year's end, which means another increase. The market's expectations for the Fed have not decreased, though. Conversely,
"Even though inflation forecasts have dropped dramatically over the previous two weeks and are now even lower than they were at the beginning of the year, as of today, the market expects at least one interest rate hike before year-end."
"A closer examination of GDP growth data shows that although private consumption makes up almost 70% of the U.S. GDP, it only contributed 40 basis points to that 2.1% in the most recent quarter. In contrast, the capital expenditures category's "data processing equipment" subcategory contributes more than half of the growth despite making up only 3% of GDP.
"However, that does not mean that the strength of the U.S. dollar cannot persist for a while longer."
