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USD to Stay Strong Despite the US Fiscal Cliff and the Fed's Open-Ended QE Programme
By: PR Newswire
Nov. 7, 2012 03:29 AM
LONDON, November 7, 2012 /PRNewswire/ --
The US Dollar will remain a strong currency in the medium term despite the looming US fiscal cliff and the harmful effects of the Federal Reserve's open-ended and theoretically unlimited quantitative easing (QE) programme, says Saxo Capital Markets UK.
John J. Hardy, Head of FX Strategy at Saxo, comments:
"Obama's re-election means political and Federal Reserve business as usual in the US - but also means plenty of uncertainty surrounding the fiscal cliff.
In "The Dollar & the Fed: QE won't break the buck", the first e-book in Saxo Capital Markets' FX Debates Series, Saxo envisages that the USA and its currency are in a far superior position than the other major countries thanks to stronger fundamentals. As a consequence, the Dollar is likely to stay stable or appreciate over the next 12 months.
"The Dollar still looks better than most other major currencies regardless of the fact that QE is not working and is not the right prescription for the economy.
"The Federal Reserve's aggressive quantitative easing programme, while it may have kept the economy on a kind of life support and prevented a steep deflationary environment in the initial phases of the deleveraging cycle, has done little to address the structural problems of the economy. In fact, at this point, it risks inflicting harm rather than helping. It presents risks of new asset bubbles - most dangerously in commodities - and keeps too much of the worst kind of debt in the system alive while meting out negative real interest rates on savers.
"The way Obama and the lame duck Congress tackle the impending fiscal cliff will be of crucial importance for the US economy. Ironically, the worse the fiscal cliff, the better the Dollar will likely do because the US Dollar is so linked to global risk appetite and the threat of a US recession would likely see the USD appreciate.
"Another big USD event in the pipeline is next year's appointment of a possible new Fed Chairman if Bernanke decides not to run or if the political environment proves hostile to nominating someone of Bernanke's always-QE-all-the-time stripes. The process starts as early as mid-2013 and could prove quite a distraction. Any threat to the Fed's QE gravy train or suggestion that someone of a less-dovish bent could replace the Fed chairman could see the USD soar.
According to Saxo Capital Markets, the US economy is still better placed relative to other large countries. The main factors supporting the Dollar include:
The #FXdebates series of articles will be published bi-weekly over the next four months, leading the way to an event in February 2012 in collaboration with Bloomberg LINK.
The other articles in the #FXdebates series will focus on:
For more information please see: http://uk.saxomarkets.com/fxdebates
Follow the debates via twitter: https://twitter.com/SaxoMarketsUK
About Saxo Capital Markets
Saxo Capital Markets UK Limited is a wholly owned subsidiary of Saxo Bank A/S, the parent company of the Saxo Bank Group, an international financial services group specialising in trading and investment across global financial markets. Saxo Bank has operated in the UK since March 2006, initially as a branch of Saxo Bank A/S and since 1 January, 2012 as Saxo Capital Markets UK Limited.
Saxo Capital Markets UK offers private investors online trading and investment in FX, CFDs, ETFs, Stocks, Futures, Options and other derivatives, and online wealth management for Funds, Shares, ETFs, Certificates and Bonds. Saxo Capital Markets UK also offers online trading services to a broad institutional client base including Hedge Funds, Introducing Brokers and Money Managers through our award-winning trading platform SaxoTrader, SaxoWebTrader and SaxoMobileTrader and Saxo's B2B/API services.
Additionally a large base of Banks, Brokers, Asset and Money managers, utilise our award winning white label solutions, in order to provide their clients with access to all or some of our trading platforms and associated liquidity.
Find out more about FX Trading opportunities with Saxo Capital Markets.
Uriel Alvarado Cancino, Chief Public Relations and Marketing Officer, Saxo Capital Markets UK
Nicholle De Beer, Public Relations and Marketing Manager, Saxo Capital Markets UK
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