CMC Markets Focus
Biyi Cheng, Head of Greater China at CMC Markets, talks about the development of various major currencies for late 2019
Despite less volatile market conditions, the US Dollar Index (DXY) extended the bullish performance of 2018 to the first half of 2019, supported by relatively strong fundamentals in the US economy and the rising appetite of risk aversion driven by geopolitical conflict.
DXY peaked at 98.93 on July 31—its highest level in the past 26 months—after the US Federal Reserve (FED) announced the first rate cut since December 2018 in a “hawkish” tone.
How much further can the greenback run to the north in the rest of 2019? It will be a million-dollar question for investors who are keen to grasp the pulse of the market and seize a golden investment opportunity. Below, Biyi Cheng, Head of Greater China at CMC Markets, talks about the development of various major currencies for late 2019:
USD: Gradually retreating
In order to boost the domestic economy and become more competitive in the global market, many central banks around the world have eased their monetary policy to reduce potential recession and geopolitical risk.
President Trump has blamed the FED on different occasions for maintaining the benchmark rate at a high level, which has had a negative impact on domestic manufacturers. US decision-makers are also gradually abandoning the strong dollar policy introduced by former US Treasury Secretary Robert Rubin decades ago in order to reduce a large amount of deficit in their current account balance.
The change of policy direction will enhance the possibility that the FED will cut the rate again later this year. Meanwhile, the trade tension between China and the US sees no end in the short term, so tax tariffs will slow down economic growth and harm the revenue generation of US companies.