2016: Mighty dollar to strengthen again – Rabobank

By FXStreet FXStreet (Delhi) – Jane Foley, Research Analyst at Rabobank, notes that in spite of the long awaited Fed rate hike on December 16, the USD has ended the year with a whimper rather than a bang.

Key Quotes

“Although this year’s USD gains did not live up to the expectations expressed by the consensus 12 mths ago, the greenback is still the best performing G10 currency on a 12 mth view. In fact, the USD has outperformed all other G10 currencies on a 5 year view. In this period it has notched up gains of 31% vs. the JPY and 16% vs the EUR.”

“The strength of the currency has tightened monetary conditions in the US and, although the US economy is less open than most others, the USD has impacted both the external sector and the inflation backdrop. Yesterday’s release of core PCE inflation registered a stronger than expected 1.4% y/y. That said, at these levels this index is still reflecting a moderate pace of inflation. Similarly, US wage growth is still holding well below levels maintained ahead of the global financial crisis. With the USD doing a lot of the heavy lifting in terms of monetary tightening we expect that …read more

Source:: FX Street