According to a Reuters survey of over 70 foreign exchange analysts conducted between June 28 and July 1, “near-term wagers in favor of the dollar should be boosted.” Nonetheless, the survey predicted that the US dollar will lose ground against the majority of foreign currencies in the coming year.
Morgan Stanley’s Head of G10 FX Strategy North America, David Adams, is quoted in the article as saying, “For the next several months, we’ll be in a dollar-positive environment, which will result in some dollar strength in the short term. However, we expect the dollar to remain in a very broad range over a longer time horizon.”
When asked how long the dollar’s strength would remain, 37 of the 63 analysts said less than three months, with eleven saying it had already passed them by. The other 26 stated it had been more than three months.
The pull and push in expectations between the Fed’s taper plan announcement – which two Reuters polls predict will occur by September – and the belief that the US central bank won’t start paring back its stimulus until next year – adds to the uncertainty.
In the current poll, the general majority was once again for a weaker dollar in the coming year, with the EUR expected to rise 2.6 percent to $1.22 in a year, up from a 4-1/2-month low of approximately $1.18 on Thursday.
While the 12-month forward consensus is lower than expected last month, it mainly reflects the euro’s substantial drop in June, which was fueled by the Fed’s hawkish tone on robust economic recovery predictions, which bolstered the dollar.
However, financial markets have already factored this in.
Ahead of the important Nonfarm Payrolls (NFP) statistics, the survey depicts a short-term optimistic picture for the US dollar. As a result, further gains in the greenback on the strength of a higher jobs data cannot be ruled out.
Read: US Nonfarm Payrolls Predictions for June: Examining Major Pairs’ Reactions to NFP Surprises/n
