A couple of months ago, financial markets all over the globe saw record declines in the shortest span of time. Markets crashed with circuit breakers going off every day as investors were rattled with the Covid-19 induced economic shutdown.
As most of the debts are denominated in USD, the demand for US Dollar goes up massively during a liquidity crunch. Quite naturally, the Covid-19 related market crash saw a huge demand for USD. This sent the US Dollar higher against almost all the major currencies and EUR/USD crashed to it's lowest levels in almost 3 years.
However, the Fed has delivered unprecedented amount of USD liquidity in the marked for the last 2.5 months. This can potentially lead to a weak USD cycle over the next few years. In fact looking at pairs like AUDUSD, NZDUSD, USDCAD, GBPUSD, etc, it seems that USD has peaked and it will decline gradually against the other majors and event the Emerging Market currencies over the next few years.
The massive Liquidity injection by the Fed has already started to show the results and based on the current momentum, EURUSD could very well appreciate to 1.25 and beyond over the next few months.
As most of the debts are denominated in USD, the demand for US Dollar goes up massively during a liquidity crunch. Quite naturally, the Covid-19 related market crash saw a huge demand for USD. This sent the US Dollar higher against almost all the major currencies and EUR/USD crashed to it's lowest levels in almost 3 years.
However, the Fed has delivered unprecedented amount of USD liquidity in the marked for the last 2.5 months. This can potentially lead to a weak USD cycle over the next few years. In fact looking at pairs like AUDUSD, NZDUSD, USDCAD, GBPUSD, etc, it seems that USD has peaked and it will decline gradually against the other majors and event the Emerging Market currencies over the next few years.
The massive Liquidity injection by the Fed has already started to show the results and based on the current momentum, EURUSD could very well appreciate to 1.25 and beyond over the next few months.
