US Dollar in the ascendancy
The US dollar is benefitting from the uncertainty surrounding sterling and the vote on Scottish Independence. This was despite Friday’s non-farm payrolls being much lower than anticipated. They revealed that August had seen the least number of jobs added in a month for all of 2014, and as a result took some of the edge off hopes of a sooner than expected US interest rate rise. The unemployment rate did drop to 6.1% as expected, calming some of the losses.
This week, data is thin on the ground at the front end, with just the job openings figure due tomorrow, and crude oil inventories and bond auctions on Wednesday. The latter part is more active, with Thursday returning to the labour market with an unemployment claims figure. Friday is set to be the most important day for the dollar, as the retail sales figure is due. This is to be followed by the consumer sentiment data from the University of Michigan, where investors will be looking for more encouragement from the wider economic state. These will be supported by the import prices and the business inventories, to close out a mixed week.
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Another tough week for US Dollar | 26/07/2013
As expected, the US dollar sensitivity to economic data has been magnified recently following comments from the Chairman of the Federal Bank expressed his commitment to an accommodative monetary policy and this has caused it to be another tough week for the dollar. Early weakness was experienced in response to worse than expected existing home sales data, causing the dollar to slide against the majority of its major peers and notably to trade at one month lows against sterling. Some positive figures were seen mid-week, with increases seen in new home sales and better than expected growth in the manufacturing sector, prompted a slightly better performance. A survey of leading economists released this week revealed that that around 50% of those surveyed believe that the Federal Open Market Committee (FOMC) would reduce the pace of bond-buying by $20 billion per month in September. Such a result would boost dollar performance in the medium term and as a result this survey had a positive effect, but a reduction is by no means assured at this stage and speculation will continue as further economic data comes through. Finally, yesterday’s Unemployment Claims data and Core Durable Goods Orders figures both fell short of expectations and failed to give the dollar a boost. Whilst medium term forecasts are still geared towards a US dollar recovery, we will need to see some improved data coming through before progress is made in the short term. The only real data of note coming in before the weekend is revised consumer sentiment data being released this afternoon by the University of Michigan. Call in now to see how the US dollar reacts to the latest data releases.