Dollar Continues to Dominate Forex Market

The US dollar continued to dominate the Forex market during the past trading week as post-elections optimism and the outlook for Federal Reserve’s monetary policy were extremely supportive to the currency.

It is surprising to see how positive the dollar’s reaction to Donald Trump’s victory was, considering that ahead of the voting his potential win was considered dollar-negative. Yet now, economists speculate that his policies are going to be inflationary, encouraging the Fed to hike interest rates and thus supporting the US currency. Indeed, markets price in an almost guaranteed hike in December as CME FedWatch show 95% chance of a rate increase at the meeting on December 14.

The Great Britain pound was another strong currency (despite the Friday’s drop) due to positive economic data and the change of central bank’s tone from dovish to neutral.

Meanwhile, the euro was in trouble. With prospects for stimulus from the European Central Bank and the upcoming constitutional referendum in Italy, the shared 19-nation currency does not look attractive to traders at all.

EUR/USD 2.3% from 1.0832 to 1.0583, demonstrating the second consecutive weekly loss as the currency pair was falling for 10 sessions in a row. GBP/USD dropped 1.9% from 1.2568 to 1.2334. USD/JPY soared 3.8% from 106.84 to 110.87.

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