We are entering a period of uncertainty for US Dollar bulls. Logic dictates that if rest of world equity markets continue to reflect weakness, reflecting structural issues and existential threats, the USD should rally hard in response. This is not happening, yet. In fact, the Euro gained ground against the USD today, despite the “leave” camp adding to it’s slight lead according to the latest Guardian/ICM poll.
Initially, I expected the USD to rally, disregarding lessening expectations of an increase in interest rates. If the UK votes to leave the Eurozone, it would mark the beginning of the end for the union, which should be considered a positive for the US dollar. Then again, any increased expectations of market volatility may lead USD bulls to take profits on the gains made since mid-2014.
Previous major risk-off events have been negatives for the dollar, as large pockets look overseas for depressed assets to deploy their cash. As @MarkYusko frequently says, “History might not repeat, but it can definitely rhyme”.