Gold 1835,21
|
EURUSD 1,2121
|
DJIA 29836
|
OIL.WTI 45,045
|
DAX 13299,68
|
|---|
The US Federal Reserve has printed several trillion dollars since spring. In doing so, its representatives reassure the public. According to them, annual inflation will not exceed 2-3% per annum for a long time. However, a completely different inflation risk has crept up on the US dollar.
EUR/USD
What are we talking about? The US dollar has already fallen by almost 10% over the last half of the year against the basket of the major world currencies included in the DXY Index. And this fall is almost invisible. Except that the other day, the level of 1.20 was broken through in the euro/dollar pair.
However, many experts believe this is just the beginning and predict that the US dollar will fall by another 20% against the basket of currencies over the next year. Everyone knows how badly the dollar has already fallen against gold.
What does this mean?
Indeed, American citizens may not yet be too worried about rising consumer prices. The world is experiencing the worst crisis. During a crisis, prices do not go up. Let’s imagine a medium-scale production or a service company. Demand has fallen so much, even at current prices. Naturally, increase in prices is out of the question until the situation with the coronavirus is over.
But all assets issued in dollars, such as the same real estate, can fall sharply in price against other currencies.
Does this scare the American government? No, it’s not frightening. What is more, the cheaper dollar is leading to increased exports of American companies. The cheaper dollar also helps to finance the government budget, which has a huge deficit.
An additional factor contributing to the fall of the US dollar was the fact that Joe Biden won the US presidential election. As we know, Democrats welcome additional expenditure from the budget. This means that money will continue to be printed, perhaps even in greater numbers than under the outgoing White House administration.
So what should American investors do? It is fair that they go into stocks, gold and cryptocurrencies, getting rid of the depreciation of the US dollar by all means.
What awaits us today?
01.30 Australian Trade Balance for October
11.00 EU retail sales for October
14.00 ISM Business Activity Index in the US Service Sector for November
Important Notes on This Publication:
The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.