In the world’s foreign currency markets, the dollar exchange rate weakened according to the world’s most recent reports in the USA, the US central Bank Fed for the first time this year, which means a minor yield to US compared to other global currencies.
The dollar index, which shows the value of the US currency towards the six most important currency, lowered last week 0.44 percent, to 97.84 points, which is its value lower the second week in a row.
The euro exchange rate was strengthened by 0.5 percent towards the dollar, to $ 1,1697. The American currency weakened in relation to Japanese yen, by 0.37 percent, so the price of the dollar slid to 147.18 yen.
The Key Report on Inflation in the USA, measured consumer prices, has shown that inflation stable was 2.7 percent on an annual basis, for 0.1 percentage points lower than economists forecast. In such circumstances, as well as due to the weakness in the US labor market, the expectations of the FED will lower the interest rates for a quarter of a percentage point and possible on two more occasions by the end of the year.
According to the CME Fedwatch, the money market reflects the likelihood of reducing interest rates for a quarter percentage points in September of as much as 93 percent, HINA transmits. Fed’s interest rate reduction in September this year, and perhaps another year, remains the main forecast for most economists who surveyed Reuters, in the middle of growing concerns about the world’s largest economy.
“Risks of the recession remain low, but I think it is wise to take a more neutral attitude and reduce interest rates at the upcoming meetings,” he stated in his note Jeffrey Roach, the main economist of LPL financially.
However, according to some analysts, it is not just about interest rates. In Morgan Stanley, they estimate that the dollar risk premium is currently six percent compared to the range of five to nine percent since April. This investment bank now sees enough space to return the risk premium to these peaks or even their exceeding, which potentially weakens US currency. Investors are already increased protecting their investments in American assets from exchange rate risks, the Reuters states.
On the other hand, most analysts expect that the euro will benefit from any fifth break-up agreement in Ukraine.
“The Meeting of the US President Donald Trump and Russian Vladimir Putin and every major clarity of the path in the conflict in Ukraine have longer than a dollar,” Francesco Pesola, Forex Strategist in the ING.
