US Dollar Q2 Forecast: Dollar to Push Forward as Major Central Banks Eye Rate Cuts

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The US dollar performed phenomenally in Q1 - something that is likely to continue but perhaps to a lesser degree now that growth is moderating and rate cuts come into focus

The Fed alluded to the overall resilience of the labour market by stating that job gains remain ‘strong’. January saw 229k jobs added while February contributed another 275k. However, signs of easing have appeared in the data that typically precedes larger declines in non-farm payroll data, and this is via the job opening and labour turnover survey.

Other central banks, however, are not so fortunate. Several European Central Bank officials, for example, have explicitly come out and identified June as a potential start date for rate cuts and will be hoping that the stagnant economy can hold on until then.

In addition, the US economy is moderating – declining from annualised growth of 4.9% in Q3 to 3.2% in Q4 and on track for 2.1% in Q1 this year. Should signs of weakness appear, the Fed will be motivated to cut rates to avoid a recession. Employment is another factor that is keeping the economic machine humming. Job security and an abundance of available jobs has supported consumption and consumer spending to a large degree.

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