Largest interbank FX dealer by market share goes bearish on dollar after 1.6% drop

Last week, following the US Labor Department’s figures having demonstrated that employers in North America have been on something of a recruitment drive compared with March this year, and signs of the economy continuing to grow and salaries increasing in April, the US dollar has not increased in value.

Ordinarily, FinanceFeeds would not consider such market-related movements of significant value, however the interesting aspect from an FX industry perspective in this particular case is that Citigroup, the world’s largest interbank FX dealer by volume, being responsible for the handling of 16.11% of global FX order flow, has stated that “the dollar is on tenuous footing” even in light of stronger data.

At the end of last year, many analysts considered that the dollar would be the currency of 2016, largely due to America being home to the benchmark major tender, and the potential volatility in Europe in the advent of a potential Brexit, and the instability caused by the Greek debt placing the US dollar as a stable vantage point from which to trade other volatile currencies.

Indeed, with Janet Yellen, Chair of the Federal Reserve, having taken a close look at changing the method by which rates are calculated, Citigroup’s strategists are taking an examinatory view.

Todd Elmer, FX strategist at Citi in Singapore explained this morning to Bloomberg

“Until the market starts to seriously consider the prospect of a June hike from the Fed, the dollar weakness is going to be the trend. Until we see a shift and the market starts to price in risks for more Fed tightening, the dollar is going to be on the back foot.”

It is clear that the US dollar, in keeping with the US economy’s good health this year and speedy recovery from the global financial crisis, remains the measure by which to determine all other currencies, however it seems that Citigroup’s message is to take a longer term view, particularly of importance to day traders.