The U.S. dollar will rise to par or better with the euro within the next few months, and gain against other world currencies as well, driven by higher inflation and subsequent significant fiscal tightening by the Federal Reserve.
That’s the forecast from the world’s most accurate currency forecaster, which remains strongly bullish on the greenback. From Bloomberg:
PKO Bank Polski, which topped Bloomberg’s overall accuracy rankings for the final quarter of 2016, sees the dollar’s rise pushing the euro to 95 U.S. cents or even lower by the end of June, a level not seen in 15 years. That’s the lowest call for the pair among 53 forecasters, according to data compiled by Bloomberg.
That outlook is far more bullish for the U.S. dollar than the median Wall Street forecast:
“We envisage a stronger dollar against not only the euro, but globally,” Warsaw-based Kosaty said. “I expect further dollar strengthening and a parity break in euro already in the first quarter, with a 0.99 level expected at the end of March. The dollar’s peak should come in the second quarter” when the pair could reach 95 cents or “even lower.”
Bloomberg also notes that the investing public is beginning to buy into the dollar’s big recent rally. Only 8% of traders polled a few months ago believed the euro would fall to parity versus the dollar by the end of June 2017, but now that number has swelled to 18%. What’s more, 11 of 53 banks polled believe that currency parity will occur.
The second half of the year could be less rosy for the greenback, however, with most analysts seeing the dollar’s value flattening out or dropping through the end of 2017.
The PowerShares DB US Dollar Index Bullish (NYSE:UUP) was trading at $26.37 per share on Monday morning, down $0.04 (-0.15%). Year-to-date, the largest ETF tied to the value of the U.S. dollar has declined -0.34%, versus a 1.43% rise in the benchmark S&P 500 index during the same period.