2017 is projecting to be a good year for the US dollar, which makes it a bad year for US exporters.
In December, the US Federal Reserve hinted at three rate hikes in the upcoming year. This would also seem to fit with president elect Donald Trump’s views. And though the Federal Reserve is nominally an independent institution, it was attacked as being politicized by Trump during the presidential campaign, and the president elect has frequently made clear his support for a normalization of rates.
Rate normalization will take the global economy into uncharted waters after an unprecedented era of monetary easing and low interest rates. The USD could continue its rise against other currencies as central banks around the world are unlikely to follow suit with hikes, particularly those in China and the European Union. Other possible knock-on effects include a higher price of oil and higher debt servicing costs across the highly-leveraged developed world.
Here’s what to expect from the USD in 2017: