The long winter is here for the dollar. After breaking an important support around 95 area, the selloffs in the dollar gained extra momentum today, as the market pushed the dollar index to 94.1 against a basket of currencies including Swedish Krona.
The broad based weakness in the dollar is being driven by two major fundamentals,
- President Trump’s economic agenda, which pushed the dollar higher right after the election even if it passes through the Congress, the process would be much slower than originally anticipated. In addition to that, the White House remains dogged by a series of accusations of colluding with Russia and the administration is simply struggling to shrug it off.
- While the Federal Reserve has hiked rates twice this year and unveiled plans to reduce its $4.5 trillion balance sheet, its forecasted path remains much weaker/lower than the forecast back in 2014, which had originally pushed the dollar higher. During this time, Dollar was supported by an array of dovish commentaries from other central banks around the world namely the European Central Bank (ECB) and the Bank of Japan (BoJ). These banks are now looking to reverse their easing course and that is not bearing well for the dollar.
Swedish Krona has already strengthened from its bottom in December around 9.43 per dollar to 8.25 per dollar as of today and we at FxWirePro believe that further downside is very much likely and we expect the Krona to strengthen towards 7.65 per dollar.
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