Forex Brokers Waning US Credibility And Other Factors Weighing On Dollar
                     Forex Brokers Live
Waning US Credibility And Other Factors Weighing 
On Dollar
When the coronavirus crisis first hit the U.S., traders immediately began to buy safe haven currencies, 
such as the U.S. dollar. Since the dollar index hit its peak in mid to late March, the dollar started falling 
based on the economy in the U.S. and the rest of the world beginning to reopen. The dollar then 
traded in a range from late March to mid-May. At that point the dollar fell off a cliff and continued to 
rapidly depreciate since then. There are many factors weighing heavily on USD but the currency’s safe 
haven status is now in question.U.S. credibility risk for dollar
The reason the U.S. dollar was at first considered a safe haven by investors was due to the strength of 
the American economy which traders perceived to be better suited to absorb the damage from Covid-
19 and then recover quickly. However, the Trump administration’s lack of leadership on tackling the 
virus has seriously damaged the credibility of the U.S. government.
 President Trump’s messaging on the pandemic is muddled and confusing, swaying from full-on anti-
mask denialism to suddenly promoting mask-wearing as a sign of patriotism. This has put into 
question the government’s competence and also the American economy’s ability to recover from the 
crisis.
As a result, when market sentiment turns risk-averse the USD may, instead of appreciating as a safe haven asset, 
like it did during the beginning of the coronavirus crisis in the U.S., the dollar may end up going the opposite 
direction. This can be a lucrative opportunity for traders who are able to short the U.S. dollar at the right time. As 
long as you have a reputable Forex broker you should be able to capitalize on future market fluctuations. Dovish Fed 
bearish for U.S. dollar
Another factor which is weighing on the dollar is a highly accommodative U.S. Federal Reserve. Chairman Jerome 
Powell has vowed that the Fed will continue to do whatever it takes to keep the economy afloat. This has assured 
the markets that the Fed will keep interest rates at rock bottom for quite a long time, resulting in a bearish tone for 
the U.S. dollar.
U.S. economic picture looking sketchy
Although there has been extremely rapid growth in various economic data points in the U.S., this has followed a 
massive decline in employment and consumer confidence. This has resulted in the American economy entering a 
recession. Economic data in the U.S. will be watched closely by Fed officials who are poised to remain even more 
dovish if indicators start to hint at a deteriorating economic situation.
Chairman Powell has stated that one of the bright spots in an overall bleak picture for the U.S. is recent positive data on 
construction activity in the U.S. However, the latest data puts this optimism into question. U.S. construction spending 
dropped even more than expected in June with a drop of 0.7 percent, compared to an expected 0.5 percent. This was 
followed by a drop of 1.7 percent in May.
Another central bank official, Dallas Fed President Robert Kaplan, has pointed out that the U.S. labor market could also see 
some trouble on the near-term horizon, suggesting that the recent employment recovery could slow significantly. Instability 
in the job market can seriously hurt consumer spending, putting the recovery in jeopardy. There are signs that the American 
consumer is hurting as a result of the economic crisis with consumer confidence down more than expected in July.
All of this negative sentiment on the U.S. economy can eventually result in further downward movement in USD. A Forex 
trader with a trustworthy broker may have an excellent opportunity to profit from selling the dollar if negative economic 
data continues to be revealed for the U.S. This, combined with the potential of the U.S. dollar losing its safe haven status, 
can prove to be quite profitable for dollar bears during risk-off sentiment.
Political uncertainty
Amidst all of these bearish factors for the U.S. dollar, significant unease in the markets is likely to result from the 
uncertainty of the upcoming American elections. President Trump has hinted at possibly delaying the election while also 
questioning the legitimacy of the future results.
 Although the likelihood of actually delaying the election is low, just the mere suggestion exacerbates worries of an unstable 
American political system, further weakening the safe haven status of the U.S. dollar.
On the other hand, positive developments in the U.S. economy can help to provide strength to the USD. However, 
regardless of the direction of the market, Forex traders will have opportunities to capitalize in the short-term and medium-
term. With a dependable broker there is plenty of profit to be made in the Forex markets not matter what the conditions.