The US dollar traded flat in yesterday’s trading session, erasing initial losses right after the New York Fed President John Williams said that the US economy would stay strong in 2019 and inflation would tick up above 2 percent, meaning that the Fed should continue to raise interest rates gradually. However, it was an awful day for equity markets, with S&P down 500 -3.06 %, Dow Jones down -3.1%, and Nasdaq down -3.8% . What makes today awful is not just the losses, but the fact the market got what it thought it wanted, a Fed pause and a trade truce, and yet equities couldn't hold a rally.
Furthermore, after the nasty day in equity markets yesterday, it seems to be a reality that growth in the US will slow next year with the interest rate curve continuing its inversion. An inverted yield curve might mean a recession in the US; those expectations plunged the equities lower, and the US dollar erased initial losses.