The US Dollar rally is being questioned as the third quarter GDP report tops market forecasts. Some analysts argue that this is a good time for the dollar to be up while others say it is simply too soon to know.
A strong third quarter growth outlook and an upward revision to forecasted GDP growth were the catalysts behind the strength in the US dollar. Investors, especially those who bought the dollar when the economy was weak, are anticipating a rebound of the currency after a brief period of depreciation. It seems that there is no end in sight. Indeed, there is an underlying factor that is encouraging the strength in the dollar, namely a weak US economy.
There are reasons to believe that the second quarter, when economic growth was expected to be weak, was actually weak. The first quarter of this year was a record breaker, especially in the business sector. If the second quarter is as weak as some experts predict, it will only get worse.
The weak economic conditions around the world will certainly hurt the dollar. Global trade, capital flows, and financing will all be affected and will make the situation worse.
It is not entirely clear if the weak economic conditions are temporary or permanent. Global economic conditions will probably change. In fact, the US and other large economies will have to adjust their policies to accommodate these new realities and global economic outlooks.
The best way to protect the currency from weakness is to buy when the market is bullish and sell when it is bearish. In the current environment, investors are looking for a long-term investment as well as a short-term support or resistance. However, it will take a bit of patience and discipline to determine which direction is the right call.
The best indicator for long-term bullish investment in the stock market is the real estate market. When the housing market starts to go up, the economy starts to pick up and a buyer’s market is at its peak. The US economy and the real estate market are linked. When the price of the house drops, the economy picks up and so does the dollar.
With the US economy on the mend, the rally can continue, especially with the third quarter and strong third-quarter outlook, but the market may stall if the US Federal Reserve raises interest rates again. It also looks like the European Central Bank will start its own bond buying program.
This new global growth outlook has been created out of necessity alone. When the global economy and the housing market pick up, it increases the demand for US dollars and creates a stronger dollar.
While the global markets are still growing, the US economy is slowing down, particularly in manufacturing. Manufacturing is one of the biggest contributors to the US economic outlook and the biggest contributor to the US dollar. Without manufacturing the US dollar will weaken against major currencies such as the Canadian dollar, Japanese yen, British pound, and euro.
As manufacturing continues to fall, the value of the dollar will decrease. This will affect the value of the trade deficit in the US dollar and the United States trade deficit.
Because of this trend, it is not clear if the US dollar will stay on the rebound because the trade deficit will increase or whether the US dollar will continue to decline. If the trade deficit increases, it will cause a stronger dollar and a weaker dollar.
As the United States economy gains strength and momentum, the dollar depreciation will also increase. When the dollar strengthens, the trade deficit will become a drag on global economic activity in the United States as it is a drag on global trade. The United States will have the same effect on the value of the dollar as a trade deficit, and it will slow global trade, but it will eventually become more of a drag on the trade deficit.