USD Forecasts, Trends and News for 2020

Key fundamentals that previously propped up the USD (such as company revenues, inflation rates and interest rates) have been rapidly eroded. However, there are drivers for a temporary shift in risk demand for the US dollar. Nothing goes down in a straight line, and the US dollar might bounce before it continues its trend lower.

The US dollar has dropped steadily for the last 3 months against nearly all major currencies.

However, as reported by Bloomberg Aug 11, the shorting of the US dollar - betting that USD will continue to drop - is becoming a crowded trade and may backfire.

Bank of America predict that an early discovery of a vaccine against the coronavirus would be a positive for the US dollar. That's because Europe and Asia have a higher chance of fresh waves of infections the longer it takes for a vaccine to be found, a scenario that's bullish for the US dollar, read more at the Bloomberg report.

In July market USD forecasts started predicting US dollar weakness during the second half of 2020. This was triggered by the mid-July european leaders delivery a historic stimulus package which was seen by market commentators as positive for the euro and hence negative for US dollar.

In early May the continuing coronavirus pandemic and an associated possible re-escalation in the US-China trade tensions has moved the market into safer currencies such as the USD and JPY.

The US dollar held its value in 2019 despite the US-China trade tensions, mainly because the greenback is still considered a safer currency to own than most others.

National Australia Bank (NAB) have revised upwards their Aussie dollar forecasts now expecting the AUD/USD rate at US80c by June 2022, up from their previous forecast of US75c.

While Westpac see the AU dollar hitting US80c 6 months earlier by the end of 2021.

For 2020, NAB sees the Australian dollar at US74c by year-end, up from a predicted US72c.

In September, after breaking 0.74 US cents, the AUD fell against most of the major currencies. The potential second wave of COVID-19 is dampening expectations for global growth and US election uncertainty is driving risk-off sentiment, which does not benefit the AUD. While the focus remains with the underlying risk narrative a shift in key economic data sets is also weighing on the currency. Recent Consumer Price Index data came in below market expectations and the domestic growth outlook has flattened following Victoria’s second wave lockdown, raising expectations monetary policy will ease before the end of the year. Should the RBA cut rates and the market appetite for risk continue to sour, the AUD could be trading between 0.68 and 0.70 US cents in the short-term. October Update

Read more about FX Broker and Bank analysts' predictions for AUD to USD future trends in our blog article AUD to USD Forecast Review.

September was a relatively stable month for the CAD versus other major currencies. Bank of Canada left rates unchanged at 0.25% for the fourth time, as expected, maintaining its dovish (conservative) tone as the economy faces a slowdown. GDP results have recently exceeded market expectations, however, are still below pre-pandemic levels. Canada faces a second wave of COVID-19 and has reintroduced targeted restrictions to some provinces. The CAD, which had been gaining ground against the US dollar since mid-April, has begun to lose ground. The CAD remains vulnerable to further corrections in risk sentiment as markets re-assess expectations for global growth amid the uncertainty of a second coronavirus wave.  October Update

Read more about FX Broker and Bank analysts' predictions for USD to CAD future trends in our blog article USD to CAD Forecast Review.

Increasing lock-downs in Europe due to second-wave coronavirus outbreaks combined with potential trillion dollar US stimulus spending has Commerzbank predicting short term US dollar strength against the Euro. However longer term they see that increase in US government debt proving a drag on USDEUR.

Read more about FX Broker and Bank analysts' predictions for USD to EUR future trends in our blog article USD to EUR Forecast Review.

The drop in the pound towards the end of September has gathered speed on increased concern over more coronavirus cases and Brexit uncertainty.

It marked the first time the UK currency has traded below $1.27 since July.

Market analysts are predicting a possible drop to US$1.25 in the event of a ‘No-deal Brexit’.

Read more about FX Broker and Bank analysts' predictions for GBP to USD future trends in our blog article GBP to USD Forecast Review.

Indian rupee is up around 3% against the US dollar (in August) since its low of 77 versus the greenback in April and is gaining favour from bank commentators such as HSBC due to the attraction of the carry trade – the ability to earn higher interest when holding INR versus other major currencies.

Read more about FX Broker and Bank analysts' predictions for USD to INR future trends in our blog article USD to INR Forecast Review.

The US Dollar bottomed out at the beginning of September 1 since then the dollar has strengthened against the euro, pound, Australian dollar, Canadian dollar and others. This was off the back of a recent (downward) correction in global equities which triggered a risk-off environment and a return to demand for the dollar as a safe-haven currency. Global news around a second wave of COVID-19 and uncertainty around the US election has pushed the US dollar higher and moving in the opposite direction of the S&P 500 (US stock index). News around the election will increasingly weigh on the direction of the USD in October and volatility is likely. Key market drivers will be potential policy outcomes and uncertainty around results which could generate USD safe-haven demand. The Japanese yen was the best performer within the major currencies in September. Despite radical monetary policy, the Bank of Japan now projects that it won’t accomplish its 2% inflation target at least until March 2022. The BoJ will hold a monetary policy meeting on October 28. Any announcements on interest rates and monetary policy could impact the value of the yen. Typically, JPY will gain when stock markets depreciate. Further correction of the equity markets from all-time highs, and safe haven demand driven by uncertainty, could put the currency in good stead to continue its upward trend. October Update

Goldman Sachs and RBC Capital forecast a large drop for US dollar against Japanese Yen to continue with a USD/JPY rate of 95 in the near future.

Read more about FX Broker and Bank analysts' predictions for USD to JPY future trends in our blog article USD to JPY Forecast Review.

Since the end of June, the Mexican peso has gained almost 10% against the dollar, the best performance among about 140 currencies tracked by Bloomberg. The peso has also delivered the No.1 carry trade — the gains made by borrowing dollars and buying short-term peso-denominated securities — a reward for investors with the stomach to go in after a precipitous 18% selloff in the first half of 2020.

Read more about FX Broker and Bank analysts' predictions for USD to MXN future trends in our blog article USD to MXN Forecast Review.