Since the beginning of the year, the US currency has lost value to other major currencies, the EUR/USD pair started the year at $1.12 and is now at $1.225, in GBP/USD the difference is not so accentuated due to the weakness of the British Pound, however, after a phase in which the pair sank to $1.16 since the $1.308 of early 2020, the currency pair now trades at $1.35. In the USD/JPY, the pair sank from 107.82 to 103.32 where it moves today, which is still relevant considering that the Japanese currency is an excellent haven asset and that with the stock market in Historical maximums derived from an unmatched risk appetite, should result in a balance between the two currencies, or at least a minor imbalance.
If, on the one hand, the weakness of the US Dollar is justified by the overwhelming liquidity injected by the Fed and by the millionaire stimuli to the economy decided by the US Government, which surpass any other amount of the main economies of the world, it is still true that almost all today the world is submerged by a mountain of liquidity and debt that should weaken its currencies. In addition, the capacity of the world’s largest economy to regenerate and turn around a crisis is undeniable, much more expeditiously than any other, which should result in greater optimism in relation to the US Dollar.
The fundamental question therefore arises, will the weakness of the US currency just result from an imbalance in liquidity fundamentals or will it be something more tactical, such as manipulating the currency in a way that weakens and thereby gives a strong boost to exports, fundamental sector for the economy. This is the big question, as it is the answer to it that will give the most probable scenario for the value of the currency in the medium term, one to two years since weakening now to stimulate the economy will result in a faster and faster recovery. The consequence in a monetary policy less dovish, which will end in a bull market cycle for the US Dollar, that is to say, to lose in the short term, but a winner in the medium and long terms.