August 24-28, 2020. Temporary drop in demand for the dollar

2020-08-23
Nancy Pelosi

The strengthening of the dollar in the coming week is likely to end and the growth of European currencies will begin.
The main reason for the weakening of the US currency will be the agreement between Congress and the White House on the aid package. House Speaker Nancy Pelosi made such a promise at the Democratic convention, hoping for the party’s candidate to win the presidential election. In this case, Congress and the White House will no longer have disagreements on such issues.

Trade talks between the United States and China are another factor in the weakening of the dollar. They were postponed many times, but at the end of the outgoing week, the White House and the Ministry of Commerce of the PRC confirmed the preparation of a meeting of delegations. The fact of negotiations will lead to an increase in stock markets and a temporary drop in demand for the American currency.

The real threat to the major currencies will be the speech of the head of the Fed in Jackson Hole. Jerome Powell will announce the parameters of the Fed’s policy at the traditional, annual economic council. The growth of the dollar index can be ensured by the official confirmation of the thesis of the FRS Protocols.

The document released last week showed the position of the department: refusal to print money, transition to fiscal incentives. Markets regard this decision as a signal for a sharp tightening of monetary policy.