At the beginning of the year, the growth of the dollar was supported by four important factors: the steady growth of inflation, economic growth, the Fed's monetary policy, and the geopolitical activity of the Trump cabinet. By the end of the year, some of these drivers have noticeably weakened, which makes it possible to predict the approaching trend reversal. Consider them in more detail.

Inflationary expectations (the yield on 5-year TIPS bonds) peaked in May 2018, after which there was a noticeable decline. The business does not see prospects for consumer price growth, in part, it is connected with the strengthening of the dollar index, and partly with doubts about the sustainability of high consumer demand.

At the same time, inflation in the eurozone is rising, and even some decline in the last two months as a whole does not cancel this trend. The spread between inflation rates in the US and the eurozone is decreasing, which supports the euro.

The second factor is economic growth. At the beginning of the year, ISM indices showed perennial highs. There was even some euphoria associated with the introduction of tax reform, while indicators of activity in the eurozone, such as ZEW, Ifo, PMI Markit and others, showed the exact opposite trend. By the end of the year, trends in both regions began to converge. ISM indices slowed growth, while in the eurozone they again began to show signs of recovery.

As for monetary policy, there are quite important changes. The Fed seeks to raise the rate to a neutral level of 3%, and if a year ago the markets were confident that the rate would rise further, only more slowly, then now there is no such certainty. In the eurozone, the expectations at the beginning of the growth cycle of the rate remain almost unchanged. The first rise is expected in the summer of 2019, which ultimately leads to a decrease in the effect of this factor in favor of the dollar.

There is one more important moment. The US Treasury keeps its deposits in the regional offices of the Fed and in their branches, and by March 2019, when the national debt ceiling is exhausted, it will most likely be forced to use its accounts in the Fed, which may mean an additional 350-400 billion dollars in the banking sector. At the same time, the ECB is reducing its asset purchase program, which leads to a reduction in liquidity. Thus, by the end of the year, two counter-processes are possible, a decrease in liquidity on the part of the ECB and the provision of additional liquidity on the part of the Treasury, which will be another negative factor against the dollar.

The fourth factor is geopolitics and trade wars. Since spring 2018, it has provided strong support for the dollar, but recent events show that this factor may also lose its relevance. The United States achieved local success in the confrontation with Canada and Mexico, forcing them to conclude a new trade agreement instead of NAFTA. However, it was not possible to get such an effect with the EU, and with China, and is unlikely to succeed.

In late November, the G20 summit will take place in Buenos Aires, where, as expected, an attempt will be made to find a way out of the policy of trade wars. If this happens, the result will have a cooling effect on the bulls on the dollar and will serve as another driver for its correction.

Thus, most drivers who have pushed the dollar up throughout the year will lose their importance in the coming months. With a high probability, this will lead to a reversal of the trend for the dollar.

EUR / USD

The euro is consolidating before the ECB meeting on Thursday, the expectations are neutral, there is no significant driver in favor of growth or decline. Today, Markit reports on business activity in the US and the Eurozone will be published, they can add volatility. Support of 1.1432, resistance of 1.1495.

GBP / USD

Pound under pressure, support of 1.2919, consolidation attempt will not last long.