U.S. dollar expected to stay strong

Use of artificial intelligence also highlights currency conference.

King Dollar is unlikely to lose its crown before the end of the year.

That’s the consensus among participants at a currency conference. Among the reasons for its trend to continue: a hawkish Federal Reserve backed up by U.S. economic fundamentals, a European Central Bank on hold until late next year and Brexit.

Industry participants at Trade Tech FX in Barcelona last week were also preoccupied by whether the future of foreign-exchange will see artificial intelligence doing all the work, and the cost of compliance with increasingly stringent regulations such as MiFID II.

With just one exception, every person interviewed by Bloomberg News saw the dollar holding firm or strengthening further into year-end, as the greenback benefits from U.S. rate differentials. The currency has been on a tear this year, gaining versus most of its Group-of-10 peers.

“I see the dollar going stronger,” said Thomas Wind, head of foreign exchange and trading at Woodman Asset Management. “I can’t see really what should change that besides inflation, weaker numbers out of China and if Europe and the ECB goes a bit more aggressive on the rates side.”

With Wind’s view echoed by both buy and sell-side market participants, only Deutsche Bank AG’s co-head of currency research George Saravelos was willing to stick his neck out with a contrarian view.

Predictions of the death of voice trading with the advent of the updated MiFID regulations appear to be coming true. Andreas Anschperger, head of currency trading in Frankfurt for Allianz Global Investors, said not a single trade had been executed by voice on his desk over the last few months, with the once-common method now reserved for “emergency cases.”

The next hot topic of discussion was artificial intelligence and how it can be used to further expand automation efforts in the currency trading sphere.

“The algorithms are getting much more advanced and dynamic,” said Andrew Maack, global head of foreign-exchange trading at Vanguard Group Inc. “They’re changing their behavior based on what they’re seeing real-time, they’re adjusting for real time liquidity in the markets.”

Still, market participants continue to see a role for the traditional trader. Even Dataminr, an AI platform that makes use of sources such as Twitter to send breaking news alerts to traders, sees humans as a vital part of the process.

“As significant events occur, the machines don’t have a logic to adjust to those events and so the human element is still there,” said Edward Oliver, vice president of finance sales at the firm.