The US dollar continued its rise, reaching near the 16-month high. The dollar’s rise was mostly because of the announcement by the Fed that more tightening was needed in last week’s meeting. This means that the likelihood of the Fed continuing to raise rates in December were extremely high. This will be the fourth rate hike this year. The Fed has also guided to three more rate hikes in 2019. This is despite the projections that show the economy is likely to start slowing down in 2020.
As the Fed projected for more tightening, the dollar’s peers were having a challenge. Last week, the EU released the projection for the economy. The projections showed that the economy may slow down in 2019 and 2020, continuing the trend that has been going on this year. This was after the success of the economy in 2017. This means that the ECB will have a difficult time having a rate hike in 2019 as it had promised. This week, Mario Draghi will have a speech where he is likely to talk about the ECB’s plans for 2019.
In the United Kingdom, the sterling fell as Brexit remained a thorn in the flesh for Theresa May. She continues to face pressure from her conservative members who remain opposed to her Brexit proposals. Liberals on the other hand are campaigning on another Brexit referendum. This has seen the sterling drop sharply. At the same time, the low inflation in Japan has led the yen to slide sharply against the USD.
The USD index continued to rise and today, it reached 96.95. The indices double EMA show that there is a likelihood that the price may continue to rise. The RSI is closer to 70, which is the overbought level. It is also usually a signal of a strong trend. If the index continues to rise, it might test the 97 level today.
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