Avoid to Go Long on The USD as Negative Outlook for The US Economy

Negative Outlook for The US Economy

All investors eyes is focusing on The Fed rate hike view, also focusing in Government shutdown in US, as reported before U.S. government will be in the midst of its longest shutdown ever and while this stoppage of government activity is gripping politicians and the media, but for your information the impact on the financial markets have been limited. as reported from Dow Jones index, U.S. stocks recovered throughout the past week, volatility declined and the US dollar which fell hard at the end of the year is started to stabilizing. US government shutdown also limited US economic releases, its leads to some slow economic data response for US stocks markets

Meanwhile as reported before, The Fed officials including central bank governor Jerome Powell and their message was clear – the economy is doing well right now but the weakness in the markets and the uncertainty abroad requires them to be patient with rate hikes. And the Fed also said, They’ll continue to reduce the balance sheet but we may not see a rate hike until the summer. 

While investors focused on Jerome Powell’s comments on balance-sheet shrinkage, the main takeaway is that the economy is slowing, especially in US industry and global markets, and the Fed is retreating. All of this is reinforced by data. On Friday we learned that consumer prices declined for the first time since March, which caused annualized CPI growth to slip below 2% for the first time since August 2017. This condition given the sharp slide in oil and gas prices at the end of the year. 

So what about retail sales, as reported before, US manufacturing and service activity slowed significantly. While next week’s retail sales report could benefit from strong holiday sales, the negative outlook for the U.S. economy overall means it's not a good time to buy dollars. Earlier this January, most forex traders avoid to hold long US dollar, another good option is starting to entering the emerging markets currencies, or long JPY against US dollar, JPY well know as safe haven currency

Meanwhie, from London, Pound Sterling on the other hand was one of the best performers, but for short term. It received a lift on reports that the UK could delay its March 29 exit from the European Union. Don’t be misled, however, by the strength of the currency because there’s a very good chance that Prime Minister May will lose next week’s key Brexit vote. 

Brexit referendum is on the headline, It's hard to say which way this will go but a 'no' vote should trigger an immediate 1% to 2% decline in GBP/USD with a recovery dependent on how quickly a plan B emerges. Theresia May could push for a second vote, pro-EU campaigners could push hard for a second referendum or the UK could begin the process of leaving the EU with no agreement. On the other hand, its the right time to leave USD ?? it is your choice...