The greenback had a fruitful week, with the US currency has decently appreciated against most rivals. Safe haven demand was the key driver as investors continue to assess global growth prospects and further price in lower activity in major countries. The trade-related fears reemerged as well, which gave the additional lift to the dollar.
Despite the recent Fed’s dovish shift, the monetary policy divergence is still there as other major cen-tral banks won’t proceed to policy normalization against the backdrop of dismal economic reports. Therefore, the greenback remains attractive in this context due to higher rates in the US even as the Federal Reserve decided to take a pause in its tightening cycle.
Considering that the US economy feels better than others, and the rising concerns over the US-China trade relations, the dollar could remain elevated in the medium term. As for the immediate outlook, the risk for the US currency is the political landscape in Washington. Another government shutdown looks increasingly likely. The border security talks stalled on Saturday, and should the lawmakers fail to find a middle ground before a February 15 deadline, the government will shut down again.
Despite the recent Fed’s dovish shift, the monetary policy divergence is still there as other major cen-tral banks won’t proceed to policy normalization against the backdrop of dismal economic reports. Therefore, the greenback remains attractive in this context due to higher rates in the US even as the Federal Reserve decided to take a pause in its tightening cycle.
Considering that the US economy feels better than others, and the rising concerns over the US-China trade relations, the dollar could remain elevated in the medium term. As for the immediate outlook, the risk for the US currency is the political landscape in Washington. Another government shutdown looks increasingly likely. The border security talks stalled on Saturday, and should the lawmakers fail to find a middle ground before a February 15 deadline, the government will shut down again.