For most of this year, we have been seeing price activity in U.S. stock markets that have moved sharply higher. Most of this financial markets optimism has been propelled by the pro-growth economic policies that have been suggested by the Trump administration. But we have already seen some stalling in terms of the ways the House and Senate have been able to achieve consensus and pass large bills through the legislative process.
These events have weighed on assets like the U.S. dollar, which is typically thought of as a safe haven asset that rises in value during times of market volatility and global uncertainty.
This is why some have argued for an expectation of rallies in the greenback. The major trends in these areas are generally assessed using the PowerShares DB US Dollar Index Bullish (ARCA:UUP, Financial) and the CurrencyShares Euro Trust ETF (ARCA:FXE, Financial). The market reality, though, has been largely the opposite scenario as the US Dollar Index is now trading at the lowest levels we have seen in roughly nine months.
This type of currency performance can have a positive impact on the level of foreign consumer sales that are seen globally so investors of all asset classes will need to continue monitoring the markets for developments in these areas.
Monetary policy issues
If we are going to determine when the declines in the dollar are likely, we must assess the geopolitical context and place the analysis against the policy framework that is being espoused by the Federal Reserve. Significant discussion over the potential for Russian hacking has deteriorated some of the sentiment outlook that might have previously been thought of as a part of the likely annual rallies. This has led to increases in IT security and the best VPN services for 2017 are listed here for growing importance in internet services.
Various stocks have been influenced by these events, and this is something that can directly influence the value of the dollar. This is why it remains critical for investors in currencies and ETFs that are looking to take sentiment pulse of the markets over the next several months.
The Federal Reserve did recently raise interest rates, and this is something that did bring some buying activity back to the dollar. These moves were largely short term in nature, though, and the broader trends in the US Dollar Index remain bearish. Higher interest rates are important because they add carry value to long positions in the currency.
So whether these trends can change will depend on the geopolitical context and its influence over safe haven sentiment in conjunction with the next round of policy maneuverings that are likely to unfold at the Federal Reserve.
