12.04.2016 - We expect the US dollar increase till the end of the year

The dynamics of the dollar until the end of the year will be influenced by investors' expectations regarding the monetary policy of the Federal Reserve System. The main factors that will drive the US regulator to raise interest rates will be:

  • Reduction in the US unemployment rate, which is approaching the level of the natural unemployment rate of 4-4.5%;
  • Rising inflation against the backdrop of the termination of falling oil prices and its likely increase in the second half of the year.
  • It is worth noting that it was a low base of comparison in oil prices will lead to an increase in inflation to the target level of 2.0%. We recall that, according to the latest data, core inflation, which excludes in its calculation highly volatile indicators as energy prices, was 2.3% from which we can conclude that because of the increase in oil prices, the pace of the US consumer price index growth will be high. Despite a possible slowdown in the global economy, which has a negative impact on the US economy, we expect acceleration of the tightening of monetary policy of the Fed in the second half that along with the program of quantitative easing in the euro area with the volume of asset purchases to 80 billion euro per month, will lead to a drop in prices of EUR/USD to 1.05, and then in 2017 can be achieved a parity of currencies. In the coming months, is possible a sharp drop in the euro to 1.05-1.07 levels amid speculation on the UK’s exit from the EU structure. A referendum on this issue will be held June 23 and according to some surveys, exit supporters have a slight advantage.

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