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Thursday, 28 May 22:31 (GMT -05:00)



Foreign exchange market

U.S. Dollar Expected to Get Stronger in 2016


The U.S. Dollar has been showing a bit of weakness against the common European currency and the Japanese Yen. Most experts say that this is the result of a reaction to the recent rally sown by the U.S. Dollar triggered by the Fed’s decision to raise the interest rat for the first time in 9 years. However, today’s retracement is the result of traders and investors reducing their exposure in advance of New Year.

 

 

 

 
With that being said, the U.S. Dollar is expected to resume its rally against other major currencies in early 2016 as soon as the traders and investors return to the market after the holidays and given the rally is backed by strong economic data. By the way, Bloomberg is one of those agencies predicting a stronger dollar in 2016.
 
Over the last 3 months, the American currency has gained 2.2% against the basket of 10 other major currencies. The strength was backed by expectation of the first interest rate hike by the Fed in 9 years. The expectations eventually came true. The Fed did it and is expected to do it again at some point in 2016 if the economic figures coming from the USA allows the Fed to do so. In particular, the central bankers are going to be focused on the U.S. labor market, inflation and other economic indicators such as GPD for example.
 
At this point, the consensus forecast says that the probability of seeing another interest rate hike in March 2016 is 48%. The same figures for April 2016 are 55%. On top of that, the U.S. economy is getting stronger if to believe the latest official economic reports. This is another major factor backing the strength of the U.S. Dollar as well as the likelihood of some other interest rate hikes in 2016. According to the experts interviewed by Bloomberg, the USD index is expected to gain 2.5% by early spring 2016. They also believe that USD is going to get much stronger against other majors expect GBP and AUD.
 
Still, Masterforex-V Academy reports that international experts started giving less of correct predictions. Their forecasts are failing more than ever. Yet, there is nothing to be surprise about given the uncertainty seen in financial market and the entire global economy and financial system. Bloomberg says that the higher rate of failures has to do with oil market crash and downtrends in other commodity markets as well as the Fed’s interest rate hike.

 

 

 

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