The recent rally in the US dollar is expected to prove short-lived, with the currency stabilizing temporarily before returning to a broader decline later in the year.<\/p>\n\n\n\n
Markets are still holding on to expectations of interest rate cuts, as concerns over the independence of the Federal Reserve intensify.<\/p>\n\n\n\n
The dollar has fallen nearly 11% since Donald Trump took office a little over a year ago.<\/p>\n\n\n\n
His repeated calls for much lower interest rates, as well as his recent statement that he is not bothered by a weaker dollar, have accelerated the recent decline.<\/p>\n\n\n\n
Warsh nomination and the temporary backlash<\/strong><\/p>\n\n\n\n Following Trump\u2019s decision to nominate former Fed Governor Kevin Warsh to be the central bank\u2019s chairman on Friday, the dollar has recovered some of its losses.<\/p>\n\n\n\n Many have interpreted this choice as a sign that there may be fewer rate cuts this year than in other possible scenarios.<\/p>\n\n\n\n The euro is expected to remain broadly stable, near $1.18 at the end of February and $1.185 three months from now.<\/p>\n\n\n\n Dollar \u2018nervous\u2019 for most of the year<\/strong><\/p>\n\n\n\n The median forecasts for the euro in the six and 12 months, at $1.20 and $1.21 respectively, are the highest levels since October 2025.<\/p>\n\n\n\n For most of the year, including the coming weeks, the dollar is likely to move nervously, Trust Economics said in a note.<\/p>\n\n\n\n As noted, \u201cwe do not believe the market has yet overcome concerns about the independence and credibility of the Fed.\u201d<\/p>\n\n\n\n Dollar positions will remain net negative until the end of February, a view that has prevailed since at least last April.<\/p>\n\n\n\n Despite inflation having been above 2% for almost five years \u2013 the longest such period since the early 1990s \u2013 derivatives markets are still pricing in two rate cuts this year.<\/p>\n\n\n\n Pressure for lower interest rates<\/strong><\/p>\n\n\n\n At the same time, the ECB is expected to keep its deposit rate unchanged throughout 2026.<\/p>\n\n\n\n The government has been particularly vocal about its desire for lower interest rates, despite the fact that inflation remains persistent and above target.<\/p>\n\n\n\n There is a risk that the Fed will underestimate the upside risks to inflation and cut rates further than is appropriate.<\/p>\n\n\n\n This could lead to lower real interest rates, a steeper yield curve and further gradual depreciation of the dollar throughout the year.<\/p>\n\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":" The recent rally in the US dollar is expected to prove short-lived, with the currency stabilizing temporarily before returning to a broader decline later…<\/p>\n","protected":false},"author":1,"featured_media":27589,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[859,5],"tags":[239,655,61,2191,70],"class_list":["post-27956","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics","category-economic","tag-dollar","tag-donald-trump","tag-fed","tag-trust-economics","tag-usa"],"_links":{"self":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/27956","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=27956"}],"version-history":[{"count":1,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/27956\/revisions"}],"predecessor-version":[{"id":27957,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/27956\/revisions\/27957"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/media\/27589"}],"wp:attachment":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=27956"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=27956"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=27956"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}