The dollar is set to fall 5 percent in the next few months, the Federal Reserve isn\u2019t raising interest rates anytime soon and U.S. economic data is only going to get worse.<\/p>\n
That\u2019s what Morgan Stanley chief global currency strategist Hans Redeker told clients in a note published Thursday, citing in-house indicators showing U.S. domestic demand is set to fade in the coming months. It didn\u2019t take long for markets to prove him prescient. The greenback fell 1.3 percent Friday, capping its worst week since April, after the Commerce Department said U.S. second-quarter gross domestic product advanced at about half the rate economists had forecast.<\/p>\n
\u201cWe are quite pessimistic about, first, the outcome of the U.S. economy,\u201d Redeker said in an interview on Bloomberg Television Friday, before the GDP report\u2019s release. \u201cWhen you look at our internal indicators, which capture domestic demand very well, they are suggesting that the demand strength is going to fade from here.\u201d<\/p>\n
The greenback had rallied in recent weeks on mounting speculation the Fed will hike rates in the coming months following better-than-expected data on jobs, retail sales and industrial production. Dollar bulls\u2019 hopes were dampened Wednesday after a lukewarm policy statement from Fed officials that signaled only a gradual pace towards tighter monetary policy. They were dashed after Friday\u2019s GDP print, which showed a 1.2 percent annualized increase in the April-June period, less than the 2.5 percent median forecast of economists surveyed by Bloomberg.<\/p>\n
Derivatives traders are now betting there\u2019s only about a 1-in-3 chance of a rate hike this year, down from more than 50 percent at the beginning of the week. July data on payrolls and manufacturing, set for release next week, will give investors a clearer read on the path of Fed policy through the end of the year.<\/p>\n
Further dollar strength will be limited as policy divergence between the U.S., Japan and Europe slows, according to Steven Englander, global head of Group-of-10 currency strategy at Citigroup Inc.<\/p>\n
\u201cThe dollar still benefits when U.S. growth looks OK, but call it a limping divergence trade, not the kind of divergence trade we were talking about last year or the year before,\u201d Englander said Friday on Bloomberg Television.<\/p>\n","protected":false},"excerpt":{"rendered":"
The dollar is set to fall 5 percent in the next few months, the Federal…<\/p>\n","protected":false},"author":2,"featured_media":2410,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"Morgan Stanley Warns Currency Traders Worst to Come for Dollar - July 30, 2016","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[373,6],"tags":[],"class_list":["post-2409","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-market-news","category-daily-analysis"],"jetpack_publicize_connections":[],"yoast_head":"\n