20.06.201912:54 Forex Analysis & Reviews: The outlook for the US dollar: the end of the rally and a further decline

According to analysts, the rally of the US currency, which lasts about eight years, is its nearing completion. The US dollar may fall in price, and the currencies of developing countries - to rise in price, says experts of the analytical company Pimco.

Pimco believes that emerging markets currencies are currently the most attractive asset for investors. Experts believe that the slowdown in the US economy will lead to a depreciation of the US dollar. Pimco believes that earning markets are undervalued by around 15%.

The meeting of the Federal Reserve System (FRS) of the USA, which took place on Wednesday, June 19, did not give the dollar any grounds for optimism either. The main conclusion, which made the markets on the results of this meeting, is this: the regulator can reduce interest rates, but a little later. Currently, the central bank management has completely switched to a discussion on the rate of mitigation. In March of this year, two Fed representatives approved the rate increase in 2019, and 11 people voted to keep it unchanged. At the moment, only one representative is in favor of raising the rate, with 8 people predicting its reduction this year. According to experts, the worst for the US dollar is the fact that 7 of these 8 members see the need for two rounds of monetary policy easing.

The unstable economic environment has affected the negative mood of the regulator. At the moment, there is a slowdown in inflation, a reduction in business investment and general uncertainty. Despite the fact that the Fed has improved its forecast for GDP for 2019 and lowered its forecast for unemployment, the next step should be a reduction in the rate, not an increase, experts are sure.

The US dollar fell against most world currencies as a result of an FOMC statement, but the decline stopped amid comments from Chairman J. Powell. At the moment, the Fed chief does not see an urgent need for easing monetary policy. He stressed that the regulator is in standby and monitoring, although all changes in the text of the FOMC statement are negative for the US currency.

The main outcomes of the last Fed meeting are:

1) keeping the interest rate unchanged;

2) fixation of such negative phenomena as a fall in inflation, production activity and the volume of investments in trade and business, as well as the possibility of taking measures to prevent consequences;

3) weak inflation forecast and upward revision of GDP forecast;

4) the fall in US currency against other currencies.

Experts believe that the Fed wants to evaluate the general economic picture and expects to get more macroeconomic data before cutting interest rates.