The Collapse of the Weak US Dollar Trend

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The US dollar has started this week by losing its ground and has created a different interaction on global markets. The dollar index was 0.05% down at 100.84 at 02:45 ET. The EU political risk depreciated the dollar against the Yen by pushing down Treasury yields to one-week lows of 2.4%. Furthermore, GBP was flat after $1.2414 after dropping 0.7% on Friday and the AUD dipped 0.1% to $0.7670.


It seems like the weak dollar; which has previously supported the strengthening of the stock markets, does not support the market trend as it used to. While the commodity and the bond prices as well as the currencies of emerging economies are increasing against the US dollar, the concerns are raised for the global economy, putting pressure on stock markets. Additionally, with the FED not pointing out to any interest rate hikes in June as well as avoiding further monetary expansion contrary to BoJ’s expectation of the market and the failure to meet the expectations of the Chicago PMI, will most likely lead the US dollar to depreciate against other currencies.

The Dollar is weak and the global economy is murky:

– The latest US data announcement did not meet the expectations.
– Hopes of developments in fiscal stimulus plans under Trump have not materialized yet.
– China’s announcement over the weekend on April’s production activity, was inferior.
– A depreciation has occurred in Tokyo Stock Exchange.
– The European banking stocks have retreated.
– The markets were shaken due to the possibility of a win for far-right, anti-European Union candidate Marine Le Pen and especially after two French hard-left candidates on Friday stated that they were considering to cooperate in their bid for the country’s presidency.
– The concerns about the sustainability of the recent economic recovery heightened.

Yet again; whether this is temporary or not will depend on the outcome of the global economic data to be released in due time in the near future.

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