by Marc Chandler
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I am finishing the year like I began it, on Bloomberg Television, talking about the dollar and Fed policy. Bloomberg has made two clips of my interview available.
In the first clip (here), I discuss the dollar. I reiterate my forecast for the the Dollar Index to head toward 120.00. The consolidation between Q2 15 and end of Q3 16 appears to me to be the base of the new leg up that has already begun.
In my understanding, the pace of the dollar’s gains is more important for Fed officials than the level. The pace has clearly accelerated. I suggest that this may be one of the considerations that encourage the Fed to be on hold in Q1 17.
The second clip (here) picks up this discussion but turns specifically to the euro. Although having been warned not to provide a time frame and forecast in the same interview, I suggest the euro will break parity by midyear and, reiterate my long held idea that in this the third dollar rally since the end of Bretton Woods the euro will test its record low from 2000 near $0.8250. I tend to emphasize interest rate differentials as a way to quantify the divergence that I argue is a key driver. I recognize that intervention in 1985 and 2000 helped end the earlier dollar rallies. While this cannot be ruled out, it has not reached that point by any stretch. A weaker euro and yen are still desired. Australia and New Zealand complain about their currencies’ strength.
Tags: #USD,$EUR,Cool Video,Federal Reserve,newslettersent
