The US dollar has entered a multi-year downtrend - Standard Bank

On Tuesday, US retail sales data was weak, causing the dollar index to reach its lowest point in 15 months.

Analysts on Wall Street are forecasting that the dollar will continue to decline in value against major foreign currencies.

Retail sales in the US rose by 0.2% in June, which was weaker than the expected increase of 0.5%. Excluding car sales, underlying sales also rose by 0.2%, which was lower than the expected 0.4%. This sales activity appears to be a result of the Federal Reserve's tightening of monetary policy and the depletion of the generous stimulus payments given out during the coronavirus pandemic.

Last week saw the biggest drop in the dollar index since November of last year. The US currency is now at its lowest level in over a year, as signs of a slowing inflation rate have bolstered investor belief that the Federal Reserve will soon cease increasing interest rates, according to Bloomberg.

Analysts on Wall Street anticipate that the US dollar will continue to decline in value, especially if the Federal Reserve decides to stop its policy of increasing interest rates.

Standard Bank stated that the dollar is beginning a multi-year decline as the Federal Reserve's rate-tightening cycle transitions to an easing cycle, and this will cause the dollar to drop even if other central banks also reduce rates.

It is anticipated by BNP Paribas that the US dollar will stay feeble in the upcoming months and they are gambling on the appreciation of the Australian dollar, the New Zealand dollar, and the Norwegian krone.

Morgan Stanley is suggesting that investors sell USD/CAD with a target of 1.28 and a stop loss at 1.3350. This is due to the expectation that the Canadian dollar will strengthen as a result of Canada's strong economy and the potential announcement of fiscal stimulus from China.

Bloomberg suggests that the downward trend of the dollar may persist as the real yield curve flattens, which is one of the most reliable indicators for the dollar.

All year, hedge funds have been making wagers that the dollar would weaken, and now they have been rewarded, particularly against the Mexican peso, the Brazilian real, and the British pound, according to Reuters.

Goldman Sachs predicts that any decrease in the value of the dollar will be less severe than in previous cycles, due to the steadiness of the U.S. economy. However, the dollar could lose its footing if the Federal Reserve stops combating inflation and the European Central Bank is compelled to increase rates further.