Us Dollar To Weaken

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Us Dollar To Weaken

Dovish Fed Will Push Us Dollar Lower - Bbh

Senior FX analysts from BBH commented on how a dovish Federal Reserve will only increase the selling pressure on the US Dollar. This comes as the bond markets are going through tough times, and Gold prices keep on rising.

Looking ahead, experts believe that job data during the next few months will be weak. Meanwhile, a lot of countries are expected to sell substantial amounts of 5 and 10-year bonds. In fact, Japan is even getting ready to auction 30-year bonds.

Funds Will Move Towards Risk Assets

In the current environment, a dovish Fed policy will harm the US Dollar and divert the funds towards the risk assets. But the recent data from the US, including the ISM manufacturing index, also confirmed that the Fed will have to cut the rates.

In addition, the US labor market is also showing signs of struggle due to higher interest rates. All of this means that the Fed now has very little leeway to hold the interest rates at the current levels.

Looking ahead, a lot of experts believe that the Fed will go with multiple rate cuts before the end of 2025. If we look back, a key reason why the US Dollar gained upside against JPY & other currencies was due to the yield difference.

So, once the yield difference gets narrower and eventually turns negative, the US Dollar will lose its edge. It will be more true in the case of the JPY as the BOJ is now bullish while the rest of the world is turning dovish.

natural reaction to the dovish Fed will be a decline in the USD/JPY exchange rate. According to experts, the USD/JPY is highly likely to drop towards 140.00.

Just like that, the EUR/USD and the GBP/USD pairs are also expected to rise on account of a dovish Federal Reserve.

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