The dollar has started the new week on the front-foot after dropping over 1.5% last week. The greenback has fallen for five consecutive weeks, so the rise at the start of this week may very well be an oversold bounce rather than a trend reversal.
The U.S. dollar’s worst start in 21 years has reminded many investors of trade wars, particularly after U.S. Treasury Secretary Mnuchin commented about the benefits of a weaker dollar and the decision by President Trump to impose tariffs on imported solar panels and washing machines.
Rumours surrounded this week going from shrinking Chinese appetite of U.S. bonds to speculation that the United States would pull out of NAFTA and while real economic indicators on Friday showed stronger U.S. inflation and retail sales it did little for the struggling US dollar. Economic growth outside of the US is accelerating and monetary policy is expected to tighten more abroad putting pressure on the greenback.
After having the worst annual performance since 2003, the dollar continued to struggle in the first trading week of 2018. The dollar index fell to a three-and-a-half-month low to trade below 92, leaving many traders wondering whether this year will be another devastating one for the greenback.
Equity investors across the globe are finding no reasons to take profits after an excellent performance in 2017. Asian stocks are trading at record highs after Japan kicked off the first trading day of 2018, European markets are poised for a higher open today despite cautiousness amid the launch of new market rules from the European Union, and all U.S. major indices closed at all-time highs with S&P 500 breaching 2,700.