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Prospect for Strong Dollar looking better, while Euro retreats

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Prospect for Strong Dollar looking better, while Euro retreats

Forecasters are looking at the Dollar to have a strong year in 2017. Many variables are coming together to make that forecast a likely scenario when the Fed meets later this month.
Many believe the dollar will reach just above parity with the EUR later this year. Low-interest rates and the EU’s decision to keep interest rates artificially low in the face of inflation are making post inflation accounting deposit spreads look unattractive to investors. This lack of investment will cause the EUR to lose value against the dollar.
Another reason cited for the strong outlook of the USD is President Trump’s call to increase spending on infrastructure from $500MM to $1TR. Higher spending on stimulus projects meaning more money flowing into the economy. Which means businesses will spend more driving inflation up thereby adding strength to the dollar.
Also, expected to improve the dollar’s future is improving consumer confidence and more spending. Consumers are feeling better about the future and are willing to spend. Combined with the almost certainty the Fed will not be repurchasing T-bills as they mature lessening demand for which will cause Bond yield rates to increase causing the dollar to increase in value.
The stronger dollar means imports will be less expensive and more money will be needed overseas. Companies looking to increase purchases should look for the best tools to help move money around the markets. With the decrease in the value of the EUR, other traditional stable currencies may have attractive exchange rates. The rates vary from one country to the other. This can be due to the economic growth difference and other factors like inflation.
Europe’s economic woes will continue unabated through the first half of the year helping to drive the demand for the dollar. Don’t look to the British Pound to make a rally in H1 and boost the EUR with its own declining value steeped against the dollar. The Pound has been taking a beating on exchange markets as inflation in Germany points to a weaker Pound.
The dollar’s growing strength makes for a profitable market in exchange rates. For businesses buying overseas, moving money in a country should cost less. Taking advantage of several websites dedicated to providing the resources, comparisons, and rates of many exchange brokers around the world will only ensure you are not paying high transaction fees to move money overseas.
Experts believe the current trend is for the Dollar to improve over the first half of the year with ECB unwinding their QE in the second half of the year. It will stabilize the EUR with expected increased interest rates bringing investment back to the EU and strengthening the EUR against the USD.
Some economists believe higher interest rates in the US by the Fed attempting to control inflation, the dollar will become less attractive in the second half of 2017 thereby reversing the short-lived trend. Finding the best rates and fee structures to move money back into the US will be as important to maintaining the gains earned when exchange rates were increasing.

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