FX.co ★ The dollar turned into a Whipping Boy

The US dollar remains under strong pressure on a wave of multiple factors, the main one being the lack of inflation and, as a consequence, the likelihood of further interest rate increases not only before the end of this year, but in general in the near future.

The political instability in the American establishment, caused by the rejection of Donald Trump, is another important factor. This contributes to the confusion of investors who no longer believe that the pre-election plans of the 45th president will be implemented, and the politicization of economic actions will hinder economic growth in the country.

Another very important reason that is negative for the dollar is the likelihood of a military conflict between the United States and the DPRK. This situation always negatively affects the national currency of the country, which can enter into a military dispute. Despite the fact that, according to political experts, the probability of conflict is minimal, but the risks remain significant, and this weighs the dollar down.

The next factor that leads to the fall of the dollar is the actions of the Central Bank of Canada, which unexpectedly raised the key interest rate, as well as the ECB, which is expected if not a complete cessation of incentive measures, in any case, a decrease in the volume of asset purchases. This makes us think that some other Central Bank of the economically developed countries can follow their example.

And one more reason that dominates the dollar, at least in pairs with the haven currencies - the Japanese yen and the Swiss franc - is its selling in favor of defensive assets, which is reflected in the gold exchange rates and government bonds of the US Treasury.

These are the main reasons for what is happening now with the American currency. Assessing this state of affairs, it can be said that in the near future the dollar will remain under pressure, despite its strong decline this year in relation to major currencies. While it will be dominated by at least some of these reasons, it will be difficult for the currency to rise. As for the dynamics of inflation, it is likely to remain low in the short term, which will hinder the prospects for the normalization of the monetary policy of the Fed.

Geopolitical factors will also influence the dollar, but it is also believed that the arrogance of Americans will be overcome and they will engage in negotiations with North Korea, which will remove the risk of a heated conflict. Along with this, prices for safe haven assets will also go down, and investors will pay attention to the reduction of the balance of the Fed, which will be an important milestone in the post-crisis years.

Forecast of the day: the EURGBP pair will consolidate above the level of 0.9100. It will most likely continue its further decline to 0.9000 after overcoming this mark.

USDCAD pair has all chances to resume its rise to to 1.2230 after overcoming the level of 1.2160, if the prices for crude continue to decline.