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The broad index of USD strength rose for a third straight month in March. In the National Bank of Canada outlook, the Fed seems intent on keeping real interest rates negative for a while longer and to this end will not taper its quantitative easing anytime soon. The main scenario remains one of USD depreciation in 2021 as real interest rates are kept negative.  

The Federal Reserve seems intent on keeping real interest rates negative for longer

“The USD is more likely to be driven by real than by nominal interest rates in the months ahead. And the Federal Reserve seems intent on keeping real interest rates negative for longer.”

“US quantitative easing and negative real rates will be with us for the foreseeable future in order to keep financial conditions pro-growth. This backdrop, together with a swelling twin deficit (current-account and fiscal), argues for renewed USD weakness in the months ahead.”