US Dollar (USD) Exchange Rate Rallying; Forecast Dependent on Heavy Data Week
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The ‘Greenback’ reached a seven-week pinnacle on Tuesday in the currency market following favourable US data. The publication of US Consumer Confidence figures which reached a staggering 90.9 in July surprised, reaching a far higher level than the forecast 85.4 and the previous 86.4.
Morgan Stanley representative Ian Stannard commented: ‘We’re expecting the Dollar to gain momentum—there’s plenty to keep the market focused on the Dollar. The market will be looking for confirmation there’s a rebound in the US economy, especially in the employment data.’
The US is anticipating an influential week with a wealth of data due to be published, alongside Federal Open Market Committee (FOMC) statements.
Wednesday will see Mortgage Applications figures, followed by the much speculated about Employment Change statistics, currently forecast to rise by 230K in July.
Employment numbers will be watched carefully in the currency world as the Chairwoman for the Federal Reserve, Janet Yellen, recently made some semi-hawkish remarks regarding the US interest rate hikes.
Yellen refused to be tied to a formula, but did suggest that any interest rate hikes would be dependent on positive employment data.
Last week saw the US economy surprise with the lowest unemployment figures in eight years which caused the ‘Buck’ to rally. Therefore, if Employment Change data manages to surprise again, the US Dollar will be likely to gain higher against other major currencies. Moreover, the Employment Change figures will also indicate the outcome of Non-Farm Payrolls data set for publication on Friday.
An expert in the field, Yujiro Goto, commented: ‘It’ll be very important to hear what the Fed makes of the continued improvement in the labour market. If the US economic data comes in firm, the Dollar will strengthen against its major peers.’
Moreover, Gross Domestic Product figures alongside Personal Consumption data are also due on Wednesday, which have all been forecast to rise. One of the most highly anticipated events of the week however is the FOMC meeting which will announce the interest rates—currently forecast to remain at 0.25%—alongside the Fed Pace of MBS Purchases, and the Fed Pace of Treasury Purchases.
Thursday will prove significant again for the ‘Buck’, showing Initial Jobless Claims and Continuing Claims figures. Yellen’s most recent statements in her Semi-Annual Testimonies have proved the most hawkish remarks made by the Chairwoman regarding the hikes.
Industry expert Manuel Oliveri commented: ‘There is some positioning in the Dollar on speculation the Federal Reserve may surprise on the hawkish side. US data should remain constructive, but should not make a case for rate expectations to become more supported.’
With such an influential week awaiting the US economy, the ‘Buck’ is likely to see appropriate fluctuations. The GBP to USD exchange rate traded between 1.6932 and 1.6995 on Tuesday; versus the Euro which traded within the 1.3408-1.3444 boundaries.