The year the US dollar ends in a plus, according to the dynamics of the ICE index. The main factor that supported it is the position of the Fed on monetary policy.
In 2018, the dollar index started at 91.75 points and ends at the level of 96.00 points, while at the beginning of the year, there was a drawdown below 89.00, and the local maximum was at 97.71 points. The main reason that supported the rate of the American currency was the stable position of the Fed in the decision to continue to gradually increase interest rates. The bank for a goal balanced between decisions to raise rates three or four times, respectively, at 0.25%. In the end, as we expected, at the beginning of last year, he raised the rates four times in aggregate by 1.00%.
Also important supporting cause was the steady decline in the balance of the regulator, about which economic observers and analysts somehow stopped writing during the year. But this is one of the most important factors that stimulated investor interest in the dollar, making it more "scarce" in the market. Explain what we mean. Earlier in the period of the acute phase of the global crisis, the Fed actively stimulated the economy, "throwing" significant amounts of dollar liquidity into the financial market, which led to its weakening and a significant increase in demand for risky assets. But already from last year, the regulator began the process of reducing the balance, withdrawing this liquidity from the financial system, which began to put pressure on the demand for risky assets and, conversely, maintains the US currency.
Another reason for the attractiveness of the dollar was the revival of its function of a safe-haven currency in the wake of growing uncertainty in the world due to D. Trump's inadequate policies. An additional supporting condition is also the absence of the desire to actively raise interest rates by central banks, whose currencies are included in the dollar basket.
An important outcome of this year is the Fed, however, slightly adjusted, but still active in the issue of interest rates. The outcome of the December meeting began plans to continue raising rates and further, albeit at a slower pace.
As for the dynamics of the foreign exchange market until the end of this year, we believe that the continuing overall side trend in EUR / USD and GBPUSD pairs will most likely dominate. Currencies of the commodity group may receive support, but it seems insignificant against the background of the OPEC + decision to reduce crude oil production again. The growth of quotations of "black gold" will obviously be restrained by the continuation of a decline in the growth of the global economy on the wave of a trade war between the United States and China until the imputed mutually beneficial agreements on trade between countries are reached. The overall growth of fears in world markets with prospects for economic growth will support the demand for defensive assets, government bonds of economically strong countries, the Japanese yen, the Swiss franc, and the US dollar.
Forecast of the day:
The EURUSD currency pair is trading below 1.1400, remaining in the range of 1.1270-1.1460. If the price does not overcome this mark, there is a chance, after its decline below 1.1355, to continue falling to 1.1270.
The AUD / USD currency pair remains in a short-term downtrend. The inability of prices to rise above the level of 0.7075 could be the reason for its fall to 0.7000.
The material has been provided by InstaForex Company - www.instaforex.com
