At the end of 2018, the dollar seemed to be the consensus among hedge funds. Traders bet that the US Federal Reserve is going to pause the rates that they have and that a ton of other major economies would continue to grow very quickly. Of course, the Fed had very steady interest rates last month and the case for buying both euros and pounds has been weakening as time goes on. Economic data that is in Europe really has deteriorated and the concerns regarding Brexit have also dodged the British pound even more.
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It is incredibly remarkable to see that the dollar has held past this rising streak and this is especially the case when you look at the rising stream it has had. It also shows how curious investors are becoming regarding the global economy. Lee Hardman, who is a currency strategist over at MUFG believes that this is a sign of good things to come.
The dollar has gained for quite some time, and this is the longest series of gains that it has had since the year 2017. The Fed have stated that they are going to be patient about the rising rates and they have also signalled that the balance sheet is going to be bigger than expected. Of course, also helping the dollar are talks between the United States and even China as well. The talks carried on in Beijing this week and they also ended in Washington last week. They ended up without a deal and the US negotiator also came out to say that a lot needs to be done. The dollar is the pet currency of the market and this is the case whether or not there are risks with them being connected with the trade war that is happening in China. When you combine this with the government shutdown that has happened, it’s safe to say that there is no certainty at all.
US lawmakers have worked very hard to try and reach a tentative agreement in regards to the border. They want to secure funding that will help them to avoid another government shutdown, but despite all of the market concerns, the currency volatility has fallen over the last few weeks. A Deutsche Bank gauge also looks to be nearing its lowest in six months. The Euro on the other hand has suffered when you look at the weak economic data that is present. On Tuesday, it held at a 2.5 month low and it also suffered a hit from the day before. With weeks to go before we leave the EU, on March 29th, investors are incredibly worried that a Brexit deal will not be done in time.