Headwinds and tailwinds for the greenback

Saunderson House's Joe Smith takes a closer look at drivers for the dollar this year and what could potentially derail its strong run.

The dollar has appreciated 16.5% against its main trading partners over six months to the end of January, driven by divergent economic growth and interest rate expectations in the US relative to Europe and Japan.  Given the continued strength of the US economy and weakness elsewhere, we expect the dollar to appreciate further this year, and on a purchasing power parity basis the dollar still appears undervalued against sterling. This would provide a boost to consumers, as imports become cheaper. Further, a rise in the dollar could put pressure on oil prices (measured in dollars), which w...