USD Strides Toward Championship in Q2| Influencer‘s Insight •Jasper Lo

Although USD was not outstanding in Q1, DXY has kept increasing by 3.64% till the end of this period since its trend started to reverse early this year. Among currencies of industrial powers, only CAD (+1.34%), GBP (+0.82%) and NOK (+0.27%) enjoyed a growth whereas the rest suffered a total fall. JPY and CHF dropped rapidly by 6.42% and 6.24% respectively while the figure for EUR was nearly 4%. Therefore, USD embraces a chance to outshine the others continuously in Q2.

Last year, some heavy weights shared the same view that USD would plummet by 35% from then to the end of 2021 whereas their prediction is overturned by the fact at present. A bearish outlook anticipated unanimously, USD turned the tables and has become bullish, which cannot be contributed to a single factor or sudden transient ones. As such, it is believed that USD wont fall back to a bearish trend after a temporary rally because all factors strengthening USD are powerful. For instance, the US boasts a stronger economic recovery than Europe. Besides, American economic stimulus plan is more powerful than its European counterparts so Federal Reserve (Fed) embraces a chance to delist earlier even increase interests when compared to central banks of other countries. On the contrary, European Central Bank (ECB) is more likely to increase the debt purchase in Q2 to prevent debt interests from growing in the bloc. This will doubtlessly impose pressure on EUR but support the further development of DXY.

Besides the aforementioned powerful factor consisting of Fed‘s preparation for delisting and the quantitative easing further increased by ECB, the financial market is about to witness an unprecedented infrastructure construction scheme of USD 2 to 4 trillion proposed by Biden’s government in Q2. At the same time, Yellen launched a large-scale tax increase program to support this massive scheme. The rarest fact is that the statistics of American economy have shown a great momentum instead of a hyped illusion. It is worth mentioning that according to Fed‘s tradition, a notification for tightening monetary policies would be given almost six months in advance whereas at this time, Powell disclosed in mid-March that debt purchase will be reduced, provided a comprehensive economic recovery. Therefore, Powell and the Federal Reserve Board (FRB) will continue to imply the possibility of Fed’s delisting so that the market can be prepared.