Home Recession Recession Fears and Inflation Potential Affect USD

Recession Fears and Inflation Potential Affect USD


According to a recent survey conducted by financial services giant Allianz, 50% of American consumers believe that a recession is imminent, and 20% are actively putting away cash because they fear a situation similar to what happened in 2008. Furthermore, only 35% of survey respondents felt that putting their money to work in investment portfolios is a good idea at this time, and members of the Millennial Generation are the most likely to worry about their financial situation in the near future. This gloomy sentiment is having an impact on the United States dollar, which is expected to go through a bearish period as American and Chinese trade negotiators meet over the next few weeks.

On October 10, forex traders were bracing for another drop in the value of the greenback against major currencies such as the euro, the yen, and the pound sterling; in fact, the latter got a surprise boost after statements from British officials suggested that Brexit would be a longshot that may not take place this year. As traders settled into the middle of October, the dollar was set to drop to its lowest point over the last five weeks. At the same time, the euro enjoyed a slight rally that boosted its value at the highest level of the month.

In addition to recession fears, traders are also concerned about the lack of consensus at the U.S. Federal Reserve in relation to monetary policy. Minutes of recent meetings held by the Fed Board of Governors show that they are worried about the future of global economic growth, which in recent years has slowed down considerably. The strong economic recovery of the U.S. seems to have been a long honeymoon period, particularly when considering the low unemployment rate, but there are also valid concerns about corporate profit margins that have been thinning despite tax advantages delivered by the Trump administration.

The prospect of a falling greenback is something that could exacerbate recession fears. Forex analysts have already noticed pressure by traders who are speculating on the rebound of both the euro and the pound sterling, but this would be to the detriment of the USD. There is, however, some signs of macroeconomic optimism after the U.S. President indicated that he was willing to personally meet with the Chinese trade delegation. It should be noted that the global trade war is not the only issue pressuring the dollar; there is also the matter of how China manipulates its own currency.