The US Dollar is set to become stronger than ever compared to two of the other powerhouse currencies in the world – the Euro and Chinese Yuan.
According to CNN Money, the USD is set to strength against the Euro under the latest Greece/Eurozone deal:
There’s even talk once more about the euro, which is currently worth a little more than $1.10, potentially hitting parity with the dollar at some point in the near future.
Why is this happening? If Greece actually is able to remain in the eurozone, shouldn’t that boost the value of the the euro currency? After all, a messy Grexit seems to be off the table now.
That is true. But now that the worst case scenario for Greece appears to be in the rearview mirror, traders are focusing on the economic outlook for the United States — especially the Federal Reserve’s next steps.
If the Fed raises interest rates, as predicted, later this year, the USD will likely strengthen even further.
China has had its own financial crisis over the last several weeks. Much of the country’s stock market has stopped trading due to wild, unstable day to day swings in the market. This has forced the government to nationalize over $6 trillion in market losses.
While the buying power for Chinese goods might not have changed too terribly much, the perceived instability of the Yuan will likely stop any discussion of it replacing the USD in important foreign markets, such as the oil market.