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Experts of Toronto-Dominion Bank (TD) believe that the US currency may still strengthen in the short term. However on the long-term, the risks noticeably weakening, including in relation to the euro.
"Given the unsustainable growth of global GDP, and the fact that monetary authorities around the world are rejecting hawkish views, it's not surprising that investors began laying in quotes the likelihood of lower interest rates from leading central banks," representatives of the financial institution said.
"For us, it looks like a race to the bottom," they added.
Mitigation of the rhetoric of the Federal Reserve System (FRS) of the United States seems to be due to fears that the country's economy will no longer be able to achieve such results as before.
"With the support of short-term factors, greenback can still be strengthened. In particular, this will be observed if trade tensions move to Europe. However, long-term prospects speak in favor of the weakening of the American currency. And this should already be clearly manifested by the end of this year, "experts say.
The bank expects the dollar index to be 92.5 points at the end of 2019 and 88.2 at the end of next year .
"The "American" keeps afloat largely due to the fact that it remains the best of the worst among the G10 currencies," TD currency strategists noted.
It is assumed that the difference in interest rates in the US and the Eurozone will play in favor of a strong dollar.
Meanwhile, market participants are rapidly lining up in expectations of a cut in interest rates from the Fed this year. It is possible that the first such step may be followed in September. It can push upward the EUR/USD pair.
According to the TD forecast, the euro against the dollar will reach $1.19 by the end of 2019, and $ 1.25 by the end of 2020.
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