The Federal Reserve speeds up its quantitative tightening, and this is certainly bullish news for the USD. At the same time, this is a negative factor for the American stocks, which have entered their seasonally worst month.
Weekly Forex Outlook: Results of 2018
The New Year for most of the countries is coming and it’s time to refresh all crucial events of the passing year. This year may be rightly called memorable. 12 months of 2018 appeared to bring uncertainties, high volatility, and even chaos to markets.
Let’s start with trade wars and the rise of the USD. The Federal Reserve played a big role in the strengthening of the US dollar. 4 rate hikes let the USD reach highs of the middle of 2017. A fast pace of the Fed’s tight monetary policy caused a big differentiation with the interest rates of other countries. As a result, many currencies significantly depreciated against the USD.
Will this tendency continue in 2019? There are doubts about that. The USD may start struggling. Also, it’s worth saying about trade wars that became a positive factor for the US currency and the negative one for other markets. Mr. Trump was a hard player of this year. US-China disputes were creating high volatility pulling risky assets down, and safe haven ones up. Emerging markets is an example. 2018 was a dramatic year for them. Besides trade wars and the strong USD, the slowdown of emerging economies and internal political uncertainties put additional pressure. However, the outlook on 2019 is bright! Let’s hope for a recovery of the emerging markets.
Mr. Trump and his twitter! Mr. Trump was the greatest market mover of 2018. Do you remember how his tweets affected markets? Every word of the US president created high volatility. Tweets about trade tensions, sanctions and tariffs, Mexican border, and the NAFTA deal were stalked by traders.
And last but not least. Political uncertainties. Brexit, Brexit and one more time Brexit. Although the UK announced its decision to leave the European Union in June 2016, the Brexit deal keeps putting pressure on the GBP. Time flies but parties can’t come to an agreement. Brexit problems affected not only the British pound but the risk sentiment in general. Issues in the European Union, political sanctions and disputes between countries had a dramatic effect on markets as well.
All the factors mentioned above created sell-offs on the risky markets. For example, oil. After the oil market kept strengthening its uptrend, traders were hoping for oil at $100 but all dreams were ruined. Сomments of Mr. Trump who was hardly the one who didn’t want oil to rise, an increased oil supply caused by a limited effect of US sanctions on Iran and growing oil production of OPEC countries, global economic slowdown, and risk-off sentiment turned the market upside down. Will the oil market rise in 2019? It’s highly unpredictable.
2018 was a great year full of significant events! Not all of them were positive but we all know that markets can’t be stable! Let’s hope for the more positive 2019!
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