Investors no longer believe in the dollar

The forex market is now forming a fairly new trend, which indicates that the alignment of forces is gradually changing in another direction.

It's about the market's reaction to the news regarding the interest rate on the US federal reserve funds. Let's take a look at the recent statements made by the representatives of the Federal Reserve, which spoke about concrete improvements in the labor market, inflation and steady economic growth.

For example, more recently, Fed representative Rosengren said that the country's economy can achieve full employment next year, and therefore there are all grounds for a gradual increase in rates. The manager of the Federal Reserve Tarulo said that he did not exclude the possibility of raising interest rates this year. President of the Federal Reserve Bank of Atlanta Dennis Lockhart believes that inflation expectations are stable, and the labor market is approaching full employment.

Many members of the Fed agree on the need to raise the interest rate, and as a result, the attractiveness of the US dollar should grow, but what really happens? And there is a very different picture. On these statements, the US dollar begins to decline gradually against other currencies, especially against risky assets such as the euro, the Australian and New Zealand dollars.

To the question of why this happens, only one answer comes: apparently, large players and investors refer to such statements differently, and during a surge in volatility and growth in volumes gain positions in risky assets, since the US dollar is overbought and expectations of its further Growth do not coincide with the plans for the profitability of large financial companies and hedge funds.

Another interesting regularity of the market are futures contracts for interest rates. Quite recent changes in the negative side led to demand for the US dollar. The probability of an increase in Fed rates in September was 15% against 30% earlier this month. At the same time, 57% of market participants believe that the rates will be raised in December.

Most likely, the strengthening of the US dollar does not occur against the background of major purchases by institutional investors, but with the goal of misleading speculative traders and collecting as many stop orders as possible thanks to which it is possible to build static large support levels in the future.

Another important factor is the actions of the ECB. At his recent meeting, ECB President Mario Draghi did not make any changes in the volume of the quantitative incentive program, which was a surprise for traders. Let not in the near future, but the regulator nevertheless plans to curtail this program and tighten monetary and credit policy. And when this happens, the demand for risky assets will grow even more.

Thus, the current exchange rate forecast and the outlook for the US dollar will not depend directly on the Fed's actions, but on the position and attitude of large investors to the expectations of the ECB. Let the US dollar at the moment still has some strength, and may grow slightly against other currencies, but we are already seeing how the market is gradually changing toward risky assets, albeit not as fast as many would like.