JPMorgan hails US dollar resilience, predicts new trajectory for USD

JPMorgan, one of the major financial giants, applauded the strength of the US dollar. The financial giant, in its latest report, praised the resilience of the US dollar, adding that the dollar has overcome multiple critical junctures to emerge stronger than ever.

JP Morgan further recognized the role of federal rate cuts, which played a critical role in stabilizing the reputation of the US dollar globally.

Also read: The US dollar is as strong as in the 2000s

Why is the US dollar emerging stronger than its contemporaries?

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According to JPMorgan, the US dollar has proven “remarkably resilient”, despite deteriorating US debt indicators and employment data. The financial giant was quick to note how the Federal Reserve’s current rate reduction policy has proven particularly favorable to maintaining the dollar’s prestige on the global platform.

“This situation is now in question, and the corresponding fall in the price of Fed rate cuts has propelled the dollar to new highs since the start of the year. Simply put, the market’s macroeconomic narrative has shifted from “when” to “if” the Fed will ease its measures this year and has driven up the dollar accordingly. As stated by Meera Chandan, Global FX Strategist at JP Morgan

Apart from this, Russia’s decision to reduce oil valuation could also push the price of Brent oil to 100/barrel, thereby triggering a rise in the dollar in the near future.

“Additionally, commodities are once again at the top of the FX agenda as the complex is up almost 7% from February lows. Additionally, Russia’s decision to cut oil production could push the Brent price to $100 per barrel in the coming months, which could benefit the dollar.

The report highlighted the strong correlation between the dollar and oil verticals. Since late 2022, the dollar appears to move in sync with oil prices, working in tandem to deliver stable valuations.

“Such episodes fuel inflation while putting pressure on growth, thus supporting the dollar.” The potential move to $100 per barrel would therefore be positive for the dollar thanks to the interaction of the countercyclical nature of the dollar, a higher overall inflation and higher returns,” Chandan said.

Also read: US Dollar hammers Chinese Yuan, Indian Rupee and Japanese Yen

The USD and its competitors: the status

The report reiterated dollar rally proposals, further sharing that the company is currently bearish on the Euro, British Pound, and Yen.

Meera Chandan, FX Strategist at JPMorgan, further shared that at present, the European Central Bank may cut rates sooner than the Fed, thus widening the interest rate gap between the US and the euro zone and strengthening the dollar in its wake.

“This will widen the interest rate gap between the United States and the eurozone, putting downward pressure on the euro against the dollar.”

Similarly, JPMorgan predicted a bearish bias for the British pound, adding that GBP/USD would reach 1.22 in June 2024 before rising to 1.25 in December.

“Currently, sterling appears somewhat stuck between a potential dovish pivot from the Bank of England (BoE) on the bearish side and better UK and global growth data on the bullish side,” Chandan said.


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