US dollar resurgence could be just around the corner, according to an FX strategist at the banking giant Barclays.
Skylar Montgomery Koning tells Bloomberg that the dollar has already priced in the negative impact of President Donald Trump’s tariffs in its 10% drop year-to-date, noting that the greenback is primed to rise in value against foreign currencies.
“The fact that some of the more problematic policies from the US administration have been dialed back – and there are deals getting done – means that the economic pain for the US won’t be as bad as originally feared.”
The US dollar index (DXY) is trading at 97.57 at time of writing.
The USD outlook of Barclays comes after the US dollar printed its worst first-half performance in over 50 years. The DXY plunged nearly 11% from January to June of this year, marking its steepest decline since the first six months of 1973 when the index dropped by 14.8%.
Meanwhile, Kathy Jones, a chief fixed income strategist at the financial services giant Charles Schwab, tells Bloomberg Television that US trade policies and their resulting inflation could delay anticipated Federal Reserve rate cuts until December or next year. Rate cuts tend to devalue the dollar.
Conversely, the CME FedWatch Tool estimates there’s a 62.7% chance the Fed will cut the rate by 25 basis points at the Federal Open Market Committee (FOMC) meeting in September. The FedWatch Tool generates probabilities using the 30-day Fed Funds futures prices.
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