By Shaloo Shrivastava and Indradip Ghosh
BENGALURU (Reuters) – The U.S. greenback will stay resilient in opposition to most main currencies over the approaching months regardless of expectations of narrowing rate of interest spreads, a Reuters ballot of foreign money strategists predicted.
Though the buck weakened 0.8% final month, it was subdued from March’s 2.3% decline as persistently excessive inflation bolstered expectations of one other charge hike. rate of interest from the Federal Reserve afterward Wednesday.
The greenback is anticipated to commerce round present ranges in opposition to most main currencies over the following six months, in line with the April 28-Might 3 Reuters ballot of 75 strategists.
The easing of issues concerning the well being of the banking system following the orderly chapter of three mid-sized US lenders since mid-March means that inflation stays the primary concern because the financial system is holding up moderately properly.
A lot of the optimism across the greenback stems from the concept, with the Fed ending its tightening cycle on Wednesday, it’s unlikely to begin reducing charges anytime quickly, as some are betting on the monetary markets.
“We imagine these cuts will issue into the approaching months because the Fed, like many different G10 central banks, struggles to carry companies inflation down,” mentioned Jane Foley, head of FX technique. at Rabobank.
“We additionally anticipate the greenback to see additional bouts of assist within the coming months because of safe-haven demand.”
After rising greater than 3% already this 12 months, the euro is anticipated to commerce at $1.11 in six months, round present ranges. The pound was additionally broadly unchanged at $1.25 in six months.
The pound has gained practically 3.5% in opposition to the buck this 12 months, partially rebounding from a ten% decline in 2022.
Over the following 12 months, the greenback is anticipated to fall 2.7% and a pair of.4% in opposition to the euro and the pound respectively.
A slim majority of strategists, 20 out of 39, mentioned there can be a rise in web greenback brief positions by the top of the month. Eleven mentioned the present web shorts wouldn’t change a lot.
The euro must also profit from the European Central Financial institution’s late entry into the present rate of interest cycle, with sturdy expectations for additional hikes within the coming months.
“Whereas brief charge expectations are going to drive foreign money traits, we are going to proceed to see the ECB’s hawkish stance dominate and there are extra upsides to return,” mentioned Equipment Juckes, chief FX strategist at Societe Generale ( OTC :).
(For extra tales from the Might Reuters Foreign exchange Ballot:)