US Dollar to resume its downward trend - Wells Fargo

The currency strategy team at Wells Fargo expect the US Dollar to dropped against most major currencies later this year on the back of monetary policy.

Key Quotes:

“The U.S. dollar reversed much of its weakness in recent months after declining roughly 8 percent in 2017. Economic growth has generally remained stable in the U.S., albeit registering a slower pace than that seen to end 2017. But, growth in some other advanced economies also surprised to the downside in Q1. Global monetary policy
convergence has subsequently paused given more moderate Q1 data, increased political uncertainty and concerns of rising global protectionism.”

“In the face of near-term uncertainty, we still look for global monetary policy to tighten further in 2018. We see the FOMC raising rates three more times, and look for another rake hike from the BoE and two more from the Bank of Canada by year’s end. We do not forecast the ECB to raise rates until around this time next year, but look for it to wrap up its bond-buying program by the end of the year, even after recent political uncertainty in Spain and Italy. The Bank of Japan remains a standout, as we look for it to remain firmly accommodative.”

“Our currency strategy team looks for the dollar to resume its downward trend against most major currencies later this year. Eventual rate hikes by other major central banks should be more supportive of foreign currencies, especially given the later stage of the FOMC’s tightening cycle.”