The greenback outperformed its major rivals in 2018, though felt much worse towards the end of the year. Since the start of January, the US currency faces an even stronger selling pressure as the Federal Reserve is sending clearer signals about a pause in further tightening due to slowing growth in the US and globally, trade wars, and the increasing political pressure from the Trump administration.
The FOMC meeting minutes published yesterday revealed that the central bank will take a more cautious position in terms of managing its monetary policy amid the increasing uncertainty. Earlier this week, some Fed officials also expressed their ‘dovish’ tone on policy tightening.
The Fed emphasizes that the decision-making will depend on the incoming economic data. In this context, the greenback could be more volatile in the months to come as any strong report could revive rate hike expectations and send the buck north.
Anyway, as the monetary policy divergence factor is fading away, the dollar will lack bullish arguments and could derail the upside trend should the economy confirm the fears expressed by the Fed and by investors lately.
So, after a break above 1.15, EUR/USD may target even higher, but the potential way up won’t be easy and straightforward for the common currency as there are still many risks in Europe, from weaker economic data to Brexit and its consequences.