It is looking as though US dollar weakness could be sustained. Trade tensions between primary trade partners such as the European Union and China could escalate and weaken USD.
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2018 was an excellent year for the Greenback making gains against the majority of major currencies and several rate hikes from the Federal Reserve. It is now however losing steam.
Federal Reserve Chairman, Jerome Powell dampened investor confidence in his recent press releases with a far more dovish tone than anticipated. He does not expect to see a similar amount of rate hikes in 2019.
Since the S & P 500’s low on Christmas Eve the US dollar has fallen in value against 27 of 31 of the major currencies.
The US has already threatened China with a 25% increase on goods and if the threat proves to be true the Chinese could retaliate which would hit the US economy hard and result in significant US dollar weakness. It looks as though neither side is willing to back down. There is currently a 90-day truce in place with tariffs not in effect.
If it were not for the lack of clarity surrounding Brexit I think we could be witnessing gains for sterling over the US dollar. If you are selling the pound and have to move short to medium term it could be wise to take advantage of current levels. If you can hang fire, I would expect you to be in a stronger position later in the year.
Chairman of the Fed, Jerome Powell is due to speak and it will be very interesting to see his stance on monetary policy considering the current situation with the ongoing trade wars. If you have a trade involving the US dollar it would be wise to be tuned in. Investors will be hoping for a more hawkish tone considering his recent addresses.
Consumer Price Index (CPI) data is due out on Friday and does have the power to influence markets. It is a measure of inflation and is a key factor to any change in interest rates. On this occasion however there is expected to be little movement from last month’s figure of 0.2%.
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