FXStreet — The declining political risks in Europe are a Game-Changer for the FX universe, while the USD in light of the ongoing political and structural Concerns to lose, said the Research Team of HSBC.
We define the reasons, why we expect that the USD will lose this year to pace:
1) Political change: Now USD negative and GBP positive. The France-election should mark the turning point for the GBP. Now the political risk. Beyond of the Atlantic, the high expectations on the planned fiscal policy measures the U.S. government could be in for a big disappointment.
2) Cyclical drivers see upside risks for the EUR, but not for the USD. The financial markets are now focusing on the entry to the exit of the ECB. However, the prospect of gradual interest rate increases by the Federal Reserve in the market has priced in.
3) A cyclical to a structural shift, with a view on the US fiscal policy. The cyclical upswing due to the possible fiscal incentives can lead to structural Concerns about the budget deficit. This would make the impact of the tax reform on the US Dollar on the head.
4) The US wants a weaker USD. Highlighting the bilateral trade imbalances as well as the emphasis on a weaker USD are the Twin deficits to new awareness will help.
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