This is the time of year when markets collectively start winding down one calendar year and looking forward to the next. We will be talking about our thoughts for 2019 in the next couple of weeks, but for this week, let's review one of the most overlooked financial indicators of the year — the U.S. dollar.
The U.S. and global financial markets focused their attention on other areas throughout the year. Equity volatility, which has been led by the U.S., has reverberated around the world as we have seen ups and downs of 4 to 6 percent the last couple of months.
Oil prices have been on a sharp downturn, falling by more than 30 percent before recovering about 6 percent of that fall in the last couple of weeks.
Finally, the inversion of some parts of the yield curve has generated a ton of chatter about recession; as that has been a harbinger of recessions in the past. As to the chances of recession, watch Paul Single's latest Economic Perspectives.
The U.S. dollar has been tame in comparison. The trade-weighted index of the U.S. dollar has not varied more than 4 to 6 percent throughout the entire year.
As we stand at the beginning of December, the dollar is at its strongest for the year within those tight ranges. Glancing at the dollar against other currencies for the year, the dollar is stronger by just under 6 percent against the euro and British pound and just over 6 percent against the Canadian dollar. The Japanese yen is actually within half a percent of where it started the year.
What may be more interesting is to look back over the last three years. Believe it or not, the U.S. dollar is actually not too far from the place it was at when the U.S. Federal Reserve started raising rates back in December 2015. That was eight, 25-basis-point rate increases ago, with a ninth hike expected later this month. We did have some decent volatility last year as the dollar rallied after the 2016 presidential election.
Our View: The main point here is that markets were not sure where to take the dollar this year as financial risks and rewards were reflected in other markets. We will be talking next week about our thoughts for next year.
If we can help you with any Foreign Exchange needs, please email email@example.com or call (800) 447 4133.
|The information in this report was compiled by the staff at City National Bank from data and sources believed to be reliable but City National Bank makes no representation as to the accuracy or completeness of the information. The opinions expressed, together with any estimate or projection given, constitute the judgment of the author as of the date of the report. City National Bank has no obligation to update, modify or amend this report or to otherwise notify a reader in the event any information stated, opinion expressed, matter discussed, estimate or projection changes or is determined to be inaccurate. This report is intended to be a source of general information. It is not to be construed as an offer, or solicitation of an offer, to buy or sell any financial instrument. It should not be relied upon as specific investment advice directed to the reader’s specific investment objectives. Any financial instrument discussed in this report may not be suitable for the reader. Each reader must make his or her own investment decision, using an independent advisor if prudent, based on his or her own investment objective and financial situation. Prices and availability of financial instruments are subject to change without notice. Financial instruments denominated in a foreign currency are subject to exchange rate risk in addition to the risk of the investment. City National Bank (and its clients or associated persons) may, at times, engage in transactions in a manner inconsistent with this report and, with respect to particular securities and financial instruments discussed, may buy from or sell to clients or others on a principal basis. Past performance is not necessarily an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.|