empty
29.04.2025 12:54 AM
The Dollar Continues to Sell Off, Outlook Remains Weak

As shown by the latest CFTC report, U.S. dollar futures indicate a further deterioration in its outlook. During the reporting week, the net short position on the USD increased by $3.9 billion, reaching $14 billion. Positioning against the euro remained almost unchanged, while in other currencies, the trend in favor of abandoning the dollar continues to develop.

This image is no longer relevant

There are several reasons behind the declining interest in the dollar. The most obvious one is the threat of a trade war, which will affect most countries worldwide. In this context, the U.S. president's unpredictability and shocking methods of addressing accumulated issues do not help to increase confidence.

The second reason is the threat of a recession in the United States. The yields on short-term bonds are catching up with those on long-term bonds; three-month Treasuries have already equaled the yield of 10-year ones. This process has historically ended with a recession within a 3-to-12-month delay. Although U.S. officials assure market participants that the threat of a recession is exaggerated and the U.S. economy is stronger than ever, the facts suggest otherwise. The Atlanta Fed's GDPNow model projects a 2.4% GDP decline in the first quarter — a very serious figure.

The third reason, which could be the main one, is the uncertainty surrounding the Federal Reserve's future actions. Initially, Trump's new economic policy was assessed as inflationary, and several studies, particularly from the New York Fed, indicate rising inflation expectations. The University of Michigan's data even points to a strong increase.

This image is no longer relevant

At the same time, the yield on 5-year TIPS (Treasury Inflation-Protected Securities) has not been rising since February but has been declining. This signals an opposite evaluation — consumers expect inflation to rise, market analysts predict inflation growth, yet businesses see it falling.

This is a critical point — the Fed cannot afford a situation where market participants begin doubting its ability to maintain price stability. However, to respond appropriately, it is necessary to understand in which direction prices will move — upward or downward. Various studies provide contradictory results, which only contribute to uncertainty and doubt. Amid this complicated situation, Trump has found reasons to question the Fed's independence, which cannot be seen as a sign of stability.

This image is no longer relevant

The next FOMC meeting will take place on May 6–7. New data may clarify things, with particular attention focused on two reports—the first GDP estimate for Q1, due on April 30, and the employment report on May 2. In any case, it should be assumed that skepticism about the U.S. dollar is growing, and there are no signs of increased demand for it.

As for the stock market, it is worth noting that our expectation of continued panic sell-offs did not materialize. It is still too early to talk about a return to a growth trajectory. The S&P 500's return to the 5500 level is a result of Trump's assurances that many countries are "ready to make a deal," meaning the process of bringing production facilities back to U.S. soil could develop, inevitably leading to an inflow of investments.

This image is no longer relevant

At the same time, resolving trade issues according to Trump's scenario is far from certain. Moreover, the expiration of the 90 days could coincide with the onset of a recession, as the first data for the second quarter will begin to emerge. It is not hard to imagine that the foreign sector will reduce its dependence on the U.S. amid stagflationary prospects created by Trump's policies, which would lead to capital outflows and dollar sales. Accordingly, the scenario of a further stock market decline remains the primary one for now.

Kuvat Raharjo,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

Powell, Trump, and Everyone Else

What will change with the arrival of a new Federal Reserve Chair? This is a rather important question, and the answer to it may already have implications for the U.S

Chin Zhao 00:08 2025-06-27 UTC+2

AUD/USD. Resistance Level 0.6600 on the Horizon

The Australian dollar tested a significant resistance level at 0.6550 on Thursday, which corresponds to the upper line of the Bollinger Bands indicator on the D1 timeframe. This

Irina Manzenko 00:08 2025-06-27 UTC+2

USD/JPY. Analysis, Forecast, and Current Market Situation

Intraday demand for the Japanese yen remains steady, accompanied by broad-based U.S. dollar weakness, contributing to the decline in the USD/JPY pair. Rising expectations that the Bank of Japan

Irina Yanina 12:55 2025-06-26 UTC+2

XAU/USD. Analysis and Forecast

Gold prices are showing moderate gains for the second consecutive day, though they remain below the 3,350-dollar level. Intraday demand for the Japanese yen persists alongside broad U.S. dollar weakness

Irina Yanina 12:34 2025-06-26 UTC+2

USD/CHF. Analysis and Forecast

The USD/CHF pair has remained under pressure for the fourth consecutive day, falling back to levels last seen in 2011. Bearish sentiment toward the U.S. dollar persists amid concerns over

Irina Yanina 12:04 2025-06-26 UTC+2

Trump Again Criticizes the Fed for Being Too Slow

On Wednesday, the U.S. dollar sharply declined against major currencies after President Donald Trump stated that he has three or four candidates in mind to replace Federal Reserve Chair Jerome

Jakub Novak 10:59 2025-06-26 UTC+2

Investors Recall the Chronic Weakness of the Dollar (Further Decline in #USDX and USD/JPY Possible)

The markets continue to be dominated by the theme of Iran-Israel negotiations, previously initiated by the United States. Whether actual agreements are reached or not will have a noticeable impact

Pati Gani 09:19 2025-06-26 UTC+2

The Market Has Found a Cure for All Troubles

It seems that the heavens are aligned with Donald Trump's desires. The U.S. President's successes in the Middle East have led to a new perspective on the policies pursued

Marek Petkovich 09:04 2025-06-26 UTC+2

What to Pay Attention to on June 26? A Breakdown of Fundamental Events for Beginners

Very few macroeconomic reports are scheduled for Thursday, and the market this week has shown a clear intention to continue the upward trend that has lasted for five months. Yesterday

Paolo Greco 07:16 2025-06-26 UTC+2

GBP/USD Overview – June 26: July 9 Is Approaching

The GBP/USD currency pair remained stagnant for most of Wednesday. Let's recall an old technical signal: if the price updates a significant extreme and immediately pulls back, there

Paolo Greco 03:39 2025-06-26 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.