After a short-lived corrective rally on Friday, the greenback is back under the selling pressure at the start of the last trading week on the year. The market liquidity is getting thinner ahead of Christmas holidays, and the trading activity will be rather subdued in the days to come. The buck finishes the month on a weaker note, while the government shutdown in the US doesn’t bode well for the currency as well.
Market positioning ahead of month- quarter- and year end could distort the moves in the market, but the political events in the US make the dollar lose its appeal further. Apart from the situation in the federal government, there are rising concerns over the Trump’s criticism of the Fed and its current policy that damages the markets, according to the US President. Against this backdrop, the buck loses its appeal as a safe haven, while positive developments in Italy only increase the pressure.
On Friday, the US releases the key labor market data that could affect the short-term dynamics in the dollar pairs but will hardly change the market sentiment dramatically. Strong numbers may lift the USD across the board but there is a risk of profit-taking in this scenario as traders get disappointed in the US currency as a safe haven bet.