The twilight of the dollar's record strength?

Wall Street is trying to recover from the slump in stocks. On Friday, US stock futures continued their gains from Thursday's session. However, the long-term forecasts for the stock exchanges seem unfavorable. The same may soon be with the USD.

From Monday to Friday, the Dow Jones increased by 2,64 percent. S & P 500 at the same time gained 3,29 percent, and Nasdaq Composite 4,02% Thus, the three main indices stand a chance to break the series of losses that has been going on for three weeks.

The current stock price rebound, however, may prove difficult to sustain. It seems that the main concern of investors, i.e. fear of recession in the context of high inflation and aggressive interest rate hikes in the US, will remain a problem for the coming weeks and months. As long as better economic prospects do not emerge, stock markets may remain under pressure.

When are there better times for the exchanges?

Jerome Powell, chairman of the Federal Reserve, reiterated in his speech to the US Congress that his commitment to curbing price increases was unconditional. There are statements from the Fed that interest rates should be raised again by 75bp in July and then a few more hikes of 50bps should be made.

Market estimates say the federal funds rate could rise to 3,5-3,75 percent this year, which would be the top of the current cycle. The valuation of further Fed actions in 2023-2024 seems to indicate the possibility of lowering interest rates to the level of 2,75%. Loosening the monetary policy could turn out to be a stage favorable for bonds, but also risky assets - stocks or even cryptocurrencies.

Will the dollar lose when other central banks start hikes for good?

Are we headed for the fall of the record levels of the US dollar, the strength of which may come from, among others, from expectations for interest rate hikes in the US? It seems that the USD may already be somewhat "ripped" by the market, especially in the light of growing expectations for interest rate increases by the European Central Bank, the Bank of Switzerland and finally the Bank of Japan, where inflation is at the highest in 7 years and exceeds the Bank's target of 2 percent

Investors may therefore turn away from the dollar in the near future. Unless, of course, the expectations regarding the actions of the above-mentioned central banks are fulfilled.