The value of the U.S. dollar has been climbing upwards, largely buoyed by widespread expectations that the Federal Reserve may soon raise interest rates across the nation.
Dollar expected to keep climbing
Regardless of any political or economic certainty stemming from the recent Republican-led tax reform efforts, the dollar has kept on climbing upwards for some time now and is expected to continue inching higher in the immediate future. While the dollar index originally shifted above expectations in late 2017 as lawmakers geared up to pass President Trump’s Tax Cuts and Jobs Act, according to Reuters, the recent gains have largely been thanks to the widespread expectations that the Federal Reserve chair will be raising interest rates, in part to offset inflation from economic growth and government stimulus spending from the 2008 financial crisis.
Federal Reserve Chairman Jerome Powell, a Trump-appointee who replaced Janet Yellen back in February, has expressed serious optimism in the American economy. Chairman Powell indicated that the central bank is still on track to raise short-term interest rates, for instance, and even said that the speed at which interest rates are raised may be increased if the economy continues to do well, per the Wall Street Journal.
Labor Market Strength
Telling lawmakers that he thought the economy had sizably improved since December 2017 alone, Chairman Powell asserted that certain economic factors were coming into play as the central bank considers raising interest rates even higher.
“We’ve seen continuing strength in the labor market. We’ve seen some data that will, in my case, add some confidence to my view that inflation is moving up to target. We’ve also seen continued strength around the globe, and we’ve seen fiscal policy become more stimulative,” Powell told Lawmakers, per the WSJ.
While an economic downturn would certainly change the central bank’s reasoning, it appears that investors using a MetaTrader 4 demo account, are gearing up for higher interest rates; investors are already beginning to treat stocks and bonds differently thanks to the prospects of rising interest rates. U.S. News & World Report recently intoned that investors were beginning to approach purchasing bonds differently now that the government’s interest rates will impact their value differently, for instance.
As long as the economy keeps booming, expect higher interest rates to tamp down runaway inflation on the U.S. dollar. The economic future is anything but certain, but until new, higher interest rates take hold, Americans should expect the dollar’s recent gains to keep on ticking upwards.