What will happen to the dollar in 2019?

In 2018, the US currency became the growth leader among its main competitors. Since the beginning of the year, the dollar index has increased by almost 5 percent. However, concerns about the slowdown in US GDP growth and the rate of normalization of monetary policy pursued by the Fed have added political risks. Therefore the question arises: will the "American" not be able to lose the profit in 2019?

Currently, the EUR / USD pair is trading near the 1.14 mark, weighing the chances of completing the Fed interest rate increase cycle and the weakening of the European and world economies.

The American Central Bank is still planning to raise the interest rate in the first half of next year, which could support the dollar. However, the process of tightening monetary policy may slow down, due to which the greenback risks being in limbo. At the last meeting of this year, Fed Chairman Jerome Powell said that decisions on the rate are not predetermined and will be taken based on the incoming data.

It is possible that the dollar will remain under pressure until the statistical data or the Federal Reserve signals to investors that the time has come for a rate hike, which still allows for the growth of the American currency.

Meanwhile, the derivatives market now estimates the probability of a rise in the federal funds rate in 2019 only at 22%. If it really remains unchanged at 2.5% level and the ECB starts to normalize the monetary policy from September. Then in the period of May-August, EUR / USD bulls will have an excellent reason for the attack. Supporting factors for the euro including the improving statistics for the euro area, the "soft" Brexit, the completion of the budget crisis in Italy, as well as the defeat of euro skeptics in the EU parliamentary elections.

As for the US economy, its growth is likely to slow down next year. However, global GDP may grow even slower than the US. In such conditions, as a rule, greenback feels quite confident.