The greenback has been losing ground aggressively at the end of the year. The U.S. currency fails to resist the fundamental bearish drivers threatening to derail the already vulnerable upside trend in the USD. These drivers are the widespread rout in the U.S. stock markets, concerns over the economic growth, Trump’s aggressive foreign policy and political disputes, raising political uncertainty in the country. Add the President’s criticism of the Fed’s policy, and it’s not surprising that the dollar is rapidly losing its appeal both as a reserve currency and as a safe-haven asset.
Next year, the situation may get even worse should the U.S. economy shows more vivid signs of slowing along with the global GDP. In this case, the Federal Reserve that is under intense pressure from the White House will have to give up and take a pause in hiking rates, which will make the dollar even less attractive for bulls.
On the other hand, the potential global growth slowdown suggests that other major central banks will refrain from tightening as well. So in this context, the greenback will still have the advantage as the Fed hikes rates since late-2016.
The markets will also continue to closely monitor developments in foreign and domestic policy. The political uncertainty Trump’s disputed even with the Republicans and staff reshuffles could fuel a full-fledged crisis on Wall Street, which will inevitably affect the U.S. currency.