U.S. Dollar Unlikely to Dip despite Fed Committee’s Dovish Shift

The U.S. dollar remains well positioned as a global currency, while the Federal Reserve leads most central banks when it comes to normalizing monetary policies.

And while the greenback saw its value dip last week, it has recouped the losses and could stay top until some factor, like the Fed erring on rates cuts.

In the interim, a senior advisor with a leading market consultant company has said that the U.S. dollar is unlikely to face significant pressure short term.

TD Securities’ senior strategist Mitul Kotecha, gave his view in an interview published by Bloomberg on Monday, April 29. It is a pivotal week as the Federal Open Market Committee (FOMC) is expected to meet ahead of an announcement on May 1.

During the Bloomberg interview aired earlier this morning, the TD Securities advisor sounded upbeat regarding the prospects of the US dollar. His sentiments come after Friday’s U.S. GDP growth rates for Q1 2019 showed some improvement.

They also come in the wake of recent dovish stances from the FOMC. In March, the Fed committee confirmed its shift towards a dovish stance when it revised down its forecasts for rates and in light of economic activity.

But among the key takeaways in his remarks, Kotecha says that it is pretty difficult to short the U.S. dollar when it continues to offer better leverage than any other currency among the G10.

He adds that at the moment, data releases from elsewhere suggest global economies are still weak even as more and more central banks around the world become dovish.

In terms of whether or not there will be policy changes from this week’s meeting, Kotecha urges caution and states that it would be good not to expect any. More importantly, he adds, even if Fed Chairman Jerome Powell takes a more dovish stance, it wouldn’t be enough to derail USD’s run.

Market observers have noted that the Fed’s meeting this week is a potential risk event for the dollar. But most agree that the slight pullback witnessed on Friday has corrected and the greenback is comparatively in a better position when viewed against the difficulties afflicting other currencies around the globe.