According to a new note by a prominent Wall Street analyst, JP Morgan Strategists sees a modest one-year headwind for the price of the digital currency. He believes that the Federal Reserve will likely maintain its cautious approach to the economy, which means that more economic activity in China and other emerging economies may be required to fuel the digital currency.
The note from Jamie Dimon, JP Morgan’s CEO, reads as follows: “With the U.S. dollar at a historic low, there is significant risk that China could face another major trade slowdown. In addition to that, there is also the risk that the Federal Reserve will continue its cautious approach to the economy.” “The Fed will be watching China carefully to determine if it is going to move away from its current path and may take action in either direction.”
According to the note from Jamie Dimon, JP Morgan’s CEO, “we do not think the currency market will come off of this historic low, but we do think that it could remain at or just below the lows of this year. We believe that the Chinese economy is not going to experience a full-scale trade slowdown, but it may take a substantial number of years for things to return to normal in China. Additionally, we don’t think that the Fed will move in either direction, but we do think that the economy could be impacted by the change in monetary policy in the U.S..” The analyst says that his views are based on his research and consultation with the Chinese government, and the fact that the currency market has a large amount of speculative activity.
The analyst says that he expects the Chinese economy to slow down and eventually fall back into recession, but he doesn’t expect the same things to occur in the U.S. because the U.S. has been able to recover from the worst of the recession so far. “This means that we should not expect China to be able to make significant changes in its economy anytime soon. In fact, we believe that the only way that they will become successful at doing this is if the U.S. suffers a serious recession.
The analysts claim that it would take over five years for the value of the Chinese currency to recover to the point where the U.S. dollar would be a good buying point, and it would require another five years for the USD to stabilize. The analysts add that he doesn’t expect the Chinese economy to reach the same levels as the United States, but the decline in the U.S. dollar would create some difficulty for the Chinese economy to maintain the same growth rates.
The analysts concludes his note by saying, “We do not believe the Chinese economy will experience a full-scale trade slowdown, but we do believe that it may take a considerable number of years for things to return to normal in China. Additionally, we do not think that the Federal Reserve will move in either direction, but rather we believe that the U.S. economy will be affected by the change in monetary policy in the U.S..”