The recent depreciation of the euro/dollar is expected to continThe majority of foreign exchange strategists expect the recent decline in the US dollar to continue throughout the year. The main driver for major currencies for the rest of 2023 is likely to be economic indicators. A stronger-than-expected U.S. economy and rising Treasury yields caused the dollar, which had been rising against other currencies, to fall. This comes on expectations that the US Federal Reserve will end its rate hikes, sending the dollar down nearly 2% from last month's highs.
Analysts expect the current dollar trend to continue. Almost two-thirds, or 28 out of 45 analysts, believe the dollar is likely to remain below current levels against major currencies by the end of the year. We also expect it to weaken against the euro and other G10 currencies over the next 12 months.
Analyst and Senior Currency Analyst Lee Hardman said: ``The dollar and US yields have been on a strong upward trend over the past two to three months... but we seem to have reached a point where yields and the US dollar peak.'' ” he said. At MUFG, he said: He added that the market is increasingly confident the Fed will complete its rate hikes, making it difficult for yields to reach new highs this year. Recent labor market data shows the U.S. economy is still outperforming other economies, but it's starting to show signs of stress from interest rate hikes over the past year and a half. Still, currency speculators remain mostly net buyers of the dollar, indicating continued support for the dollar.
Simon Harvey, head of currency analysis at Monex Europe, explained that the dollar remained tactically long, especially compared to currencies with weaker fundamentals. The eurozone economy shrank by 0.1% last quarter, but the euro is expected to grow by about 4.0% over the next 12 months.
