The US dollar (DX=F) is heading lower, something strategists have been predicting for days in light of this week’s inflation print.
Following the most recent Consumer Price Index reading, the dollar continued to lose ground on Thursday after hitting a 15-month low. According to the report, consumer price growth in June was at its smallest rate since March 2021.
Unraveling The Weakening US Dollar
According to Jay Hatfield, CEO at Infrastructure Capital Management, the US dollar is depreciating in relation to the Euro and Asian currencies because US inflation is declining more quickly than that of Europe and Asia and foreign central banks are lagging the Fed in raising interest rates.
The trend of the dollar has changed from its strength last year. A 20-year high of 114 was set in September 2022 by the Dollar Index (DX-Y), which compares the dollar against a basket of currencies. It is currently barely below 100.
Notably, periods of dollar weakness have been associated with increases in asset values. When the dollar is not as expensive, US multinationals find it easier to sell their goods and services overseas.
JC Parets, president and founder of Allstarcharts.com, recently stated in a message to investors that the weaker dollar is a significant factor in why we have been purchasing stocks so aggressively since last year, despite all the doom and gloom.
Read more: Stock Futures Show Minimal Change
Factors Influencing Oil Investors, Says US Bank Strategist
If the dollar rises later this summer or in the fall, according to yahoo, stocks will struggle.
Commodities, which are priced in dollars, are another potential winner.
“Oil investors remain focused on the interaction of weak demand growth and output cuts from OPEC and Russia,” said Rob Haworth, senior investment strategist at US Bank Wealth Management in Seattle, in a statement to Yahoo Finance.
The futures for West Texas Intermediate (CL=F) and Brent (BZ-F) both increased by roughly 2% on Thursday.
Read more: Stocks Rally As Inflation Figures And Earnings Reports Dominate Market News