What’s next after big banks turn bearish on the US dollar?
DOLLAR SINKS FURTHER AS BIG BANKS TURN BEARISH
July 25 (King World News) – Gerald Celente: After closing at 99.91 on 17 July, the U.S. dollar regained little ground against an assortment of other major currencies, trading at 101.08 at 5 p.m. U.S. EDT on 21 July.
The buck’s value peaked at 113.1 last 9 October and has been sliding since. It has remained weak since last week’s report showing U.S. top-line inflation in June had fallen to 3 percent.
The dollar’s value has grown over the past 16 months as the U.S. Federal Reserve has been steadily raising its interest rates. With inflation closing in on the Fed’s 2-percent target rate, investors are betting the central bank’s rate-raising campaign is coming to an end.
In contrast, central banks in Europe and some Asian countries are likely to continue to raise their rates, promising higher short-term gains than the dollar will be able to offer…
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As a result, Goldman Sachs, HSBC, JPMorgan Chase, and Morgan Stanley have dumped positive dollar options. Some major banks have predicted the dollar will sink lower still.
“Signs of further improvement in the global growth-inflation mix and a U.S. ‘soft landing’ sow the seeds for U.S. dollar weakness ahead,” HSBC analysts wrote in a note last week.
Goldman Sachs dollar-watchers were more blunt. “There’s more where that came from,” they told clients in a note. “We think this [decline] can extend in the near term.”
Interest-rate futures markets are still betting the Fed will add a quarter point to its key interest rate when it meets this week. However, on 20 July, players were giving only 14-percent odds that the central bank will raise rates again in September, compared to 22 percent a week earlier.
Markets are now largely swinging to the view that the Fed will bring inflation to heel without causing a recession…
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We have forecast the “Death of the Dollar” for several months and events have proven us correct.
China trades in its own currency with Brazil, India, Russia, and a growing number of other countries and accepts their currencies in return. Member nations of the Association of Southeast Asian Nations are finalizing a plan to do the same.
Perhaps most important, Saudi Arabia has said it will now accept payment for oil in a few currencies other than the dollar.
It can be easier to trade currency-to-currency instead of translating every transaction into and back out of dollars to establish a standard of value.
However, much of the reason for abandoning the buck is geopolitical: the U.S. and its Western allies sanctioned Russia and froze its assets in Western banks, forcing Russia and China to deal directly in their own currencies. Brazil, India, and other nations began to bristle at the use of the world’s standard of value as a weapon.
The dollar will remain the world’s leading currency for the foreseeable future. However, it has permanently lost its unquestioned position as the global standard of value.
As China continues to play an increasing role in world affairs and other power centers rise—Asia, Latin America, even Africa—the dollar’s importance will continue to gradually erode.
King World News note: Regardless of how the US dollar trades from here, all fiat currencies across the globe are being incinerated by reckless central bank policies. This process of destroying the purchasing power of all fiat money is why the gold market will eventually end up in a mania along with the high-quality stocks that mine gold.
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