The acceleration of US Dollar weakness has been dominating headlines and global financial markets over the course of the last week.
Ongoing anxiety due to the current COVID-19 crisis, combined with reduced demand for safe-haven assets has seen the Dollar index slip 0.6% yesterday to its lowest level since June 2018. This opens the door for a plethora of opportunities in the marketplace.
The current outlook suggests that US economic recovery is slow and sluggish due to a spike in Coronavirus cases, and long term forecasting remains largely dependent on the outcome of the November election. Taken together, this adds a degree of uncertainty to the greenback’s stance.
USD weakness has been particularly evident in the EUR/USD exchange rate, which has recovered from a March low of 1.0637 to 1.1731 at the time of writing. The pair is now up 4.50% in 2020 with the lion’s share of the gains coming in just the past ten days.
“The market seems to have taken the view that every shift in news flow at the moment is being interpreted as Dollar weakness. Given the USD’s traditional role as a safe-haven currency, these are unusual times for a market in risk-off sentiment” – Patrick Oakley, Business Development Manager at Privalgo.
Analysts agree that it is too soon to draw long-term conclusions and suggest the decline may be short-lived. We at Privalgo believe the current opportunity in the market for USD sellers could be rapidly diminished, and with the US Federal Reserve meeting scheduled for tomorrow, locking in the best of current rates now, or hedging against the outcome, is surely a strategy worth exploring.
Volatility in any market can be mitigated via “dollar cost averaging” – a concept that one of our relationship managers would be more than happy to discuss.