There has been a strong bullish run in the mighty U.S dollar after the U.S presidential election held on 8th of November 2016.Investors were worried about Mr. Trump anti-social policies prior to the election. But things dramatically changed and favored the U.S economy after Mr. Trump came out with a hawkish speech stating that they are going to increase the fiscal spending. He also stated that tax cut policy will be implemented soon to ease the hardship of the U.S citizen. Such an optimistic statement from the newly elected president created strong positive confidence in the mind of U.S consumers and pushed the dollar higher on the ground. In the last FOMC meeting minute, the FED were able to do a rate hike due to their ongoing strong economic performance. The hike their interest rate on the basis of 25 points. In that event, the U.S dollar gained its strongest momentum in the market and hit the 14 years high. The dollar becomes broadly stronger against its all major rivals in the forex market. Currency trading was extremely difficult at that time due to high volatility in the market. But the professional traders always prefers high volatility in the market since they consider it as an opportunity to make money.
The year 2016 has very little to offer to the traders as most of the investors are now celebrating their Christmas holiday. But those who are still in the market are extremely cautious since the market tends to exhibit sudden false spike during such time. Moreover, many investors are thinking that the market has absorbed the dollar strength to a great extent. But still, the green bucks remain broadly supported by the majority of the investors as the FED plan to raise their interest rate for at least three times in the next year. If the FED can manage to hike their interest as per the plan then the U.S dollar index might break the recent 14 years high of the market.
On Monday the dollar gain suffered an extensive loss of the Japanese Yen as most of the investors are thinking that dollar bulls are now on the side line. However, the volatility in the market is extremely low due to the holiday season in the forex trading market. The mighty U.S dollar suffered a loss of 0.2 percent against the low-yielding Japanese Yen. After seeing the benchmark traders were surprised to see that the 10-year note yield suffered a loss on the last Friday. The dollar slipped against the low-yielding Japanese yen for the first time in the last 27 months as most of the U.S news release came out negative in the last week for the U.S dollar. The Aussie dollar also hit the lowest level in the forex market and the AUDUSD pair traded at $0.7160 in the financial market.
On the other hand the Chinese President Xi Jinping also stated that there has been massive fall in their economy for near about 6.5 percent and this also pushed the Aussie dollar lower in the market. In the last week the green bucks ended up with the bearish tone in the market and upon the opening of the market, the dollar bears tend to exhibit pressure in the forex trading market to push to dollar lower against its all major rivals. However, as the new rate hike decision weighs on the market in the next year’s traders are thinking that the sudden loss of the green bucks is temporary. But economist suggests that the dollar might suffer from an extensive loss in the market if the government fails to implement their stated plan. The FED will be under extreme pressure from the central bank since the central bank will require at least two rate hike before the month of November next year to readjust their inflation rate.
In the last Friday, the Japanese market celebrated their Emperors Birthday and this created significant low volatility in the market. On the other had the economist are expecting strong consumer sentiment data in the very beginning of the next year. Though most of the traders in the U.S is celebrating their Christmas holiday but the Japan will continue due to their business at a normal pace. So we can expect a stronger Yen in this upcoming week which might push the dollar lower in the financial market. However, the dollar is still supported to a certain extent in the global market as the GDP growth is now 3.5 percent but the economist forecasted 3.3 percent growth. To be precise the U.S economy is still growing in the market at a strong pace but traders despite the recent slip of the U.S dollar index in the global market. However, things will dramatically change for the green bucks if they fail to implement their stated plan very precise in the global market.
If the FED hike their interest rate despite poor economic performance then the country will suffer from an extreme level of consequence in the longer term. Such a drastic event will slow down the performance of the U.S economy to a great extent and the consumer sentiment will turn extremely negative. So there of numerous factors that the FED need to think about before they go for a rate hike program in the next year. However, the current performance of the U.S economy is strongly positive and if it goes at such a pace then we will see a stronger U.S dollar in the near term future.