US dollar rally about to end?

Financial and commodity markets analytics

The US dollar has certainly been the success story of this year gaining strongly against all assets classes including gold with global tensions and higher interest rates at the forefront of the Greenback’s dramatic rise.

The gains have caught most investors off guard as although the US economy has been powering ahead, some others such as the Canadian economy have been doing equally as well and gold, which usually jumps in times of global uncertainty has remained subdued.

The question is now when whether the US dollar will continue its winning streak as the year closes out or is the rally coming to an end?

“The substantial U.S. dollar rally was not widely expected, even within the context of looking over the past long-term downtrend in the dollar against major currencies. It has definitely gone on for long and has been a surprise based on the length and magnitude of this corrective bounce in the dollar,” said Nick Bennenbroek, head of FX strategy at Wells Fargo.

“But over time, once the fiscal stimulus eventually fades, we do expect the dollar to soften over time and there are indications that it might be getting closer to the end.” He added.

Some say the trigger for the US dollar’s reversal may be the upcoming congressional elections from the US in November where Donald Trump’s  Republican Party is in real danger of losing their majority in the House of Representatives.

The problem here is that if the opposing democrat party gain a majority they may be able to overturn or stop some of the populist policies that Trump has enacted which have made a big contribution to the dollar’s rise.


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