The Dollar is finding support amidst renewed investor anxieties over medium-term global growth according to new research, suggesting those watching this currency will have more than just the U.S. Federal Reserve and inflation expectations to consider. The U.S. Federal Reserve’s ‘hawkish shift at their June policy meeting is said by Credit Suisse to be a driver of mid-year U.S. Dollar outperformance, but so too is the rise of the Delta variant of Covid-19.
Foreign exchange researchers at Credit Suisse say the Dollar is now likely benefiting from investor demand for ‘safe-haven assets as developments in U.S. bond markets have hardly been constructive of late.
“A number of more broadly risk-negative factors might allow interpreting USD strength in ‘safe haven’ terms, pointing to simmering investor concerns about a less constructive medium-term growth outlook,” says Shahab Jalinoos, Global Head of FX Strategy at Credit Suisse.
The shift in interest rate expectations in the U.S. – the Fed now sees interest rates as likely in 2023 as opposed to 2024 – is widely cited by analysts as being behind the increased demand for the Dollar.
USD/CAD Long (Buy)
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