Browsing: US Dollar Forecast

Currency markets continue to show volatility, and there are a plenty of tier-1 events which should be treated as market-movers. The ECB, Bank of Japan and Bank of Canada will announce rate decisions. We’ll also get a look at a range of GDP and inflation reports.

German and eurozone Manufacturing PMIs beat their estimates, with readings of 58.0 and 54.4, respectively. Both readings were well into expansionary territory, above the 50-level. It’s a different story in the services sector, where German and eurozone PMIs indicated contraction, with readings of 48.9 and 46.2, respectively.

In the UK, employment numbers were a mix. Jobless claims fell to 28.1 thousand, which was much better than the estimate of 78.8 thousand. The unemployment rate climbed to 4.5%, up from 4.1%. Wage growth improved to 0.0%, after three successive declines.

China’s GDP rebounded in Q3, with a gain of 4.9%. This was up from 3.2% in the second quarter. The consensus stood at 5.4%. In Australia, the RBA signaled in its minutes that it would cut rates at next week’s policy meeting. This would likely mean a trim from 0.25% to 0.10%.

In the UK, a strong CPI release sent the pound sharply higher on Wednesday. CPI rose to 0.5% in September, up from 0.2% beforehand. The core reading accelerated to 1.3%, up from 0.9%.

In the US, jobless claims were excellent, falling to 787 thousand, down from 898 thousand beforehand. This was the lowest level since March, prior to the spread of Covid-19, which sent unemployment levels skyrocketing. Manufacturing PMI came in at 53.3, just shy of the estimate of 55.5 points. The Services PMI improved to 56.0, beating the estimate of 54.7 points. Both readings indicate expansion, above the 50-level which separates contraction from expansion.

  1. Australia Inflation Report: Wednesday, 00:30. CPI in the second quarter showed a decline of 1.9%, the first decline since 2016. Trimmed CPI, which excludes the most volatile items in the headline release, also posted a rare decline, with a read of -0.1%. The headline figure is expected to bounce back in Q3, with a forecast of 1.5%. Trimmed CPI is projected to show a small gain of 0.3%.
  2. BoC Rate Decision: Wednesday, 14:00. The Bank of Canada slashed rates to 0.25% in March has maintained this level. With the economy showing signs of a recovery, the central bank is not expected to make any changes. If the rate statement indicates that members are optimistic about economic conditions, the Canadian dollar could improve.
  3. German Prelim CPI: Thursday, All Day. Inflation in Germany has fallen off sharply. CPI has posted three straight declines, with a reading of -0.2%. We now await the September data.
  4. ECB Rate Decision: Thursday, 12:45. The ECB is likely to maintain rates at 0.00%, so the focus will be on the rate statement and press conference with ECB President Christine Lagarde. Any discussion about deflation or the high value of the euro could affect the movement of the currency.
  5. Bank of Japan Rate Decision: Thursday, Tentative. No change in policy is expected from the BoJ, which has stubbornly kept to an inflation target of 2 percent, which is well above current inflation levels.
  6. German GDP: Friday, 7:00. Germany’s economy plunged 10.1% in Q2, but a strong rebound is projected for Q3, with an estimate of 6.9%.
  7. Eurozone Inflation Report: Friday, 10:00. Deflation remains a major headache for eurozone policymakers. CPI has posted two straight declines and another decline of 0.3% is expected in October. The core reading is projected to remain at 0.2%.
  8. Canada GDP: Friday, 12:30. Canada releases its GDP reports on a monthly basis. In July, the economy slowed to 3.0%, down from 6.5% beforehand. We now await the August release, which should be treated as a market-mover.
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US dollar forecast: Preview for the main foreign exchange events that will rock currencies ► focusing on major events and especially on publications in the USA, moving the US dollar (greenback). Here are some general data. Scroll down for the latest US dollar outlook

USD and forex general characteristics

The United States Dollar is the reserve currency of the world, partly due to its use in settling oil prices and other commodities. Foreign exchange pairs are divided into majors, minors, and crosses. Both majors and minors include the USD.

US economic indicators and political developments influence currencies more than anywhere else in the world. The decisions and statements by Federal Reserve officials make the biggest waves. The US economy is by far the largest in the world. US politics and policy also have an outsized impact on currencies.

The outlook consists of mostly US economic events but also key market-moving figures from other major economies. The euro-zone, the UK, and Japan stand out.

Recent USD Moves

The greenback suffered a bad start to the year: poor growth and scandals hurt the US dollar. Hopes for fiscal stimulus faded with the repeated failures to repeal Obamacare. Despite two rate hikes in the first half, the dollar struggled. Other economies outperformed America.

The second half already looks a lot different: economic growth reached 3% annualized and the Fed seems to stick to its plan to hike rates three times. In addition, Trump’s tax plan inspires markets, despite hurdles to pass it before Christmas.

Headwinds come from the political scandals. Low inflation also weighs on the dollar. If the “mystery” persists and wages do not accelerate, Janet Yellen and co. could refrain from further tightening. The new Fed Chair Jerome Powell will take office in February 2018, and he may not stick to the current plan of raising rates three times.

Latest weekly US Dollar forecast

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