The decline of the US dollar’s strength came as a surprise to even the most qualified experts. They believed that interest rate hikes and reforms under President Trump would strengthen the currency. Instead, the opposite happened. So far, the new administration has had difficulty passing any meaningful legislation. Meanwhile, the FED raised interest rates twice this year, but it did not have the desired effect on the US dollar.
Experts have now coined this effect ‘zombification’, where the markets have failed to respond positively. In fact, the effect of FED interest rate decisions has lost its impact, as can be observed during their last announcement 2 weeks ago. Furthermore, due to the economic impact of hurricanes Irma and Harvey, it is unlikely to see further rate hikes this year. Come next year, there will be different faces on the FED board, and that reduces the chances of further rate hikes, at least in the first half of 2018.