USD may have peaked - NBF

According to analyst at the National Bank of Canada, for USD weakness to be sustained, trade tensions between the US and major trade partners such as China and the European Union will have to subside. They expect the greenback to slide during 2019.

Key Quotes:

“After a solid 2018, the U.S. dollar is now losing steam. The trigger for the greenback’s recent woes was of course Federal Reserve Chairman Powell who, after sounding hawkish last month ─ which precipitated a flattening of the yield curve and a stock market decline ─, adopted a much more conciliatory tone in early January. 

“Since the S&P 500’s recent low on Christmas Eve, the greenback has lost ground against 27 of 31 major currencies resulting in a sharp correction for the trade-weighted USD.”

“We expect further weakness for the big dollar this year due to the return of risk taking after last year’s global stock market rout. That said, for USD weakness to be sustained, trade tensions between the U.S. and major trade partners such as China and the European Union will have to subside.”

“The trade-weighted greenback may have peaked already. While there may be periodic bouts of USD strength, perhaps due to risk aversion or Fed speeches, we expect the trade-weighted USD to give back in 2019 at least half of last year’s 7% gains.”