In a previous post on my predictions for the Forex Market in 2010 I stated my belief that this will be a year of resurgence for the dollar. I believe that the Euro will weaken and the USD strengthen against most if not all major currencies.
It seems that the ending note of 2009 has coincided with this prediction as the Greenback ended the year on a high note, gaining on both the Euro and the Yen. This has wrapped up an incredible December run for the American currency which has gained 7% on the Eur and 4.7% on the JPY in last month alone. Is it just the beginning of a bigger run ahead? No one can know for sure but I feel that it is.
This last boost came in the wake of encouraging unemployment data from the US. The number of jobless claims which was relased Yesterday showed a surprising drop adding one more indication that the US economy may be on a faster recovery path than previously supposed.
Why is this important?
Two reasons:
- An improved economy may help the US administration reduce the enormous deficit it is now weighed under. A lower deficit will mean less pressure on the dollar.
- An improved economy increases the chance that the FED will soon raise interest rates in America which will mean a significant boost for the dollar.
As you can see, if the improving financial data which has lately been published about the US economy continue, the Dollar may be headed for a long term upward trend. Whatever happens in the future, there is little doubt that the downward trend of the USD which has lasted from the first quarter of 2009 ended in December, signifying excellent potential for 2010.
