BofA sees no greenback downtrend regardless of selloff on tariff information

On Monday, the U.S. greenback skilled a big selloff, declining over 1% following the announcement of a “common tariff” plan by the brand new U.S. administration. Buyers are questioning whether or not this might sign the start of a pattern much like 2017, when the greenback constantly fell throughout President Trump’s first yr in workplace.

Nevertheless, analysts at Financial institution of America (BofA) consider there’s not sufficient proof to declare the beginning of a downtrend for the U.S. greenback.

The market’s quick response introduced the DXY index, which measures the greenback towards a basket of different main currencies, right down to 108. This degree is taken into account a short-term equilibrium for the greenback, particularly after the hawkish stance taken by the Federal Open Market Committee (FOMC) in December 2024.

The FOMC’s choice was characterised as “an unabashedly hawkish lower” in a BofA report dated December 18, 2024.

Wanting forward, the U.S. greenback might see a resurgence in energy pending the discharge of the December payrolls report this Friday. BofA’s report titled “Labor Market Watch,” dated January 6, 2025, suggests {that a} robust labor market might result in a reassessment of expectations for any Federal Reserve charge cuts in 2025.

Buyers and market contributors are actually poised to concentrate on the upcoming labor knowledge for additional path. The anticipation is {that a} strong employment report might counteract the quick bearish sentiment and help the greenback’s worth within the close to time period.

In abstract, whereas the latest selloff has raised questions in regards to the greenback’s trajectory, BofA maintains {that a} single day’s motion is just not indicative of a longer-term pattern.

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