US dollar still on the defensive as raw materials drop in price

In Nordine Naam’s weekly forex blog for FX-MM, Natixis’ Senior Forex Analyst discusses the impact of the downturn in commodity prices on the US dollar.

Despite the optimistic tone of the Federal Open Market Committee (FOMC) statement, the US dollar weakened slightly last week. This was due, in large part, to the downturn in price of raw materials. As a result, the Dollar Index (DXY) pulled back below 99. Meanwhile, the Federal Reserve (the Fed) intends to press ahead with its monetary normalisation even though there has been a sharp slowdown in GDP growth to +0.7% in Q1 2017 (from +2.1% in Q4 2016).

Meanwhile, the EUR/USD held stable around 1.09 ahead of the second round in the French presidential election and the US Employment Situation Report. Certainly, he argues, Emmanuel Macron’s victory should be positive for the euro in the very near term. However, the EUR/USD’s rebound potential will be limited for several reasons.

To read the forecast, please click here.



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