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Dollar Rebound! Will It Continue to Rise?


The exchange rate market is like the heart of a man who plays with women's feelings, can change at any time! Who would have thought that the US dollar started a rebound trend last week after fluctuating at a low level.


For many friends who are waiting for the opportunity to exchange and live overseas, it is so cool.


Many friends even exclaim that exchanging currency is the test of mentality.


Source: Sina Finance


When something going to be unusual, there must be reasons for it. So...

  • Why did the US dollar suddenly rebound against the trend?
  • Can the uptrend continue?


Today, Panda will conduct a detailed analysis for everyone!

Reasons for the Rebound


Hawkish voices


The U.S. Bureau of Labor Statistics (BLS) released data on May 10th, showing that the year-on-year CPI in the U.S. fell from 5% to 4.9% in April, while the core CPI fell from 5.6% to 5.5%, indicating a continued downward trend in inflation. The year-on-year PPI also fell from 2.7% to 2.3% in April, with the core PPI falling from 3.4% to 3.2%, both surpassing expectations.


Source: wallstreet


In simple terms, it means that the US inflation data for April fell more than expected.


One might think that since inflation has eased, should we consider pausing interest rate hikes?


No! The Federal Reserve is clearly not following its usual course of action. Some hawkish Fed officials expressed dissatisfaction with the current pace of inflation decline, and several hawkish Federal Reserve officials have said that——


Fed board member Bowman believes that the inflation rate is still too high. If the inflation rate remains high and the labor market remains tight, further interest rate hikes "may be appropriate." Fed board member Jefferson views the progress of core inflation as "disappointing." St. Louis Fed chairman Bullard stated that the anti-inflation outlook is favorable but not guaranteed.


The result is evident: hawkish speeches from Fed officials have provided support for the strengthening of the U.S. dollar.


Safe-haven sentiment


Last week, the "grand drama" of the US debt ceiling was staged again. How to deal with the issue of the US debt ceiling has become the focus of the tug of war between the Democratic Party and the Republican Party, which also affects the nerves of the global financial markets.



As the debt default crisis becomes increasingly urgent and the two parties have yet to reach an agreement, important figures/organizations such as U.S. Treasury Secretary Yellen and the International Monetary Fund have issued warnings, stating that a series of serious consequences will occur if the U.S. defaults on its debt. This "nuclear-level" risk of U.S. treasuries has triggered an increase in market safe-haven sentiment, resulting in a slight rise in traditional safe-haven assets such as the U.S. dollar.


Can the Uptrend Continue?


Debt default risk 


Despite intense debates between the two parties regarding the debt ceiling issue in recent times, based on past experiences, consensus has always been reached before the "X day" (the deadline when government cash and some unconventional special measures are exhausted).



As a result, many experts predict that the US debt ceiling will still be raised as scheduled this round, and the probability of the US government defaulting on its debt may be relatively small. US President Biden also said on last Sunday that negotiations on the US debt ceiling are advancing, and the parties are discussing possible alternatives. The debt ceiling meeting will be held on Tuesday this week, and he maintained an optimistic view on the negotiations.


Possible pause in interest rate hikes


According to the Federal Reserve's own prediction, this round of interest rate hikes may be the last one in 2023. However, Powell stated that if the inflation rate remains high, further tightening of monetary policy may be necessary.


Source: Xinhua News Agency


In response, Cheng Shi, Chief Economist of ICBC International, stated that it is expected that the Federal Reserve will suspend further interest rate hikes in June, with future rate cuts depending on credit conditions. 


Powell hinted at the interest meeting that further interest rate hikes might be suspended, allowing officials time to assess the impact of the recent banking crisis, wait for the resolution of the political impasse over the US debt ceiling, and continue to monitor the inflation process. Therefore, the suspension of interest rate hikes during the Federal Reserve's meeting in June may be a high probability event.


The exchange rate is constantly changing, and any slight changes may affect the trend of the exchange rate.


Panda reminds friends in the United States that if you want to remit money back to China, you can aim at the current good opportunity and take action in a timely manner. If you miss out on this wave of increase, there is uncertain that how long you will wait~



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