US Dollar Dips on Wall Street Bears, Economic Data

The US dollar is declining to kick off the trading week as Wall Street bears and disappointing economic data sent the currency lower. Despite the greenback enduring its biggest decline in two weeks, the dollar is still performing quite well as the year comes to an end.

Citigroup analysts published a report on Monday that forecast a weaker dollar in 2019, stemming from sluggish economic growth and rising interest rates beginning to hurt the economy. The financial institution writes that the buck will tumble about 2% against a basket of currencies.
With fiscal policy benefits waning and disappointing corporate earnings, the dollar’s ascent may run out of steam.

More medium term, our view is that the fiscal support to growth eventually fades in the US and tighter monetary policy starts to bite. A lower dollar becomes the most likely source of equilibrium in portfolio balance terms.

Ostensibly, the bank has joined others who are sounding the alarm on the dollar.
Last week, Goldman Sachs warned that slower US growth will result in lower dollar returns against major currencies, even with rates rising faster than anticipated.
Morgan Stanley also proclaimed that the bull run has ended and that investors should consider selling their holdings.

We believe the USD has reached its peak at around current levels. The USD may weaken as credit spreads widen, equity prices fall, and sovereign bond yields also begin falling amid disinflationary pressure and falling oil prices.

On the data front, homebuilders’ sentiment is decreasing. The National Association of Home Builders/Wells Fargo Housing Market Index fell eight points in November to 60, the lowest reading since August 2016. In November 2017, the index stood at 60. The three main components of the index all were lower: current sales conditions dropped seven points, sales expectations for the next six months decreased 10 points, and buyer traffic tumbled eight points.
The USD/CAD currency pair rose 0.32% to 1.3190, from an opening of 1.3148, at 17:37 GMT on Monday. The EUR/USD jumped 0.34% to 1.1457, from an opening of 1.1418.

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