FxPro Financial Services Ltd | Apr 01, 2021 06:26AM ET
In the early months of the year, the dollar seemed to be trying to prove its right to remain the world's main reserve currency, steadily adding against its major rivals amid talk of the end of its era. The dollar gained 5% against a basket of major competitors and tripled against gold.
This strengthening should serve as a stark reminder that the world's primary reserve currency is too early to go to its grave. In reality, it may turn out that we will see a final surge of the dollar before a prolonged fall against its major counterparts.
The realisation of these packages and the mass vaccinations improved the economy's growth prospects, justifying the dollar's attractiveness on the macroeconomic side. Meanwhile, unlike its Japanese and European central banks, the Fed allowed the crisis measures to expire and did little to adjust the optimistic market expectations.
Biden decided that it was necessary to borrow while this investment works. Overnight he came up with another two trillion-dollars bazooka stimulus. These plans should eventually boost borrowing in the near future, sustaining a rising dollar momentum but putting an even bigger time bomb on it.
The FxPro Analyst Team
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