Morgan Stanley expects USD to strengthen

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US dollar strengthens, triggered more by events happening outside the US rather than those happening in it. Continuous stresses and doubts in emerging countries cause most currencies to weaken against USD. ECB President Mario Draghi’s announcement about keeping interest rates low strengthened the USD even more.

Eventually, global capital should move to the US which provides the best risk-adjusted return. The analysts at Morgan Stanley don’t expect US recession, despite the fact that domestic growth is soft. Major events that can give signals on near-term USD outlook are FOMC and housing data which will be announced this week. If the Fed decides to cut the interest rates, it will drive tactical downward correction in the USD, however it won’t change the general upward trend.

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