Browsing: US Dollar Forecast

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

The US dollar was on the back foot but managed to climb back in a busy week. As we enter the last week before the holidays, how will currencies make their last-minute adjustments? GDP data from the US, the UK, and Canada stand out. Here are the highlights for the upcoming week.

The Fed decided to raise rates and leave the dot-plot unchanged. However, the additional dissent of Charles Evans weighed on the dollar. The greenback was also hit by lower inflation and the narrowing majority that Republicans have in the Senate. But as the week progressed, the dollar recovered also thanks to hopes that the tax bill will pass and an upbeat read on retail sales. The SNB and the BOE left their policies unchanged without rocking the boat. For the pound, the official EU approval that Brexit talks will now enter the second phase was marred by worries about the stability of the government and a not-so-great trade deal. The ECB left its policy unchanged and sounded upbeat about growth. This was not enough to change the direction regarding inflation and the general tone. The euro could not rally. The Aussie enjoyed a great jobs report and recovered nicely.

Updates:
  1. US housing data: Tuesday, 13:30. US building permits jumped to an annualized level of 1.32 million in October, but this level is not expected to hold: 1.28 is forecast now. Housing starts also looked good with 1.29 million and a level of 1.25 is on the cards for November. Note that for a meaningful effect, both figures need to go in the same direction. In some cases, one surprises to the upside and the other to the downside, offsetting each other.
  2. US Existing Home Sales: Wednesday, 15:00. Most transactions in the real estate market are of existing homes. The annualized level of sales jumped to 5.48 million in October. Another advance is on the cards now: 5.54 million.
  3. New Zealand GDP: Wednesday, 21:45. New Zealand publishes its GDP data late, but only once, making it a bigger deal than in countries where there are revisions. The economy grew by a robust 0.8% q/q in Q2. A slightly slower rate is on the cards now: 0.6%.
  4. Japanese rate decision: Thursday, early in the morning. The Bank of Japan seems to be the only central bank in the developed world not to take a hawkish turn. They keep on buying bonds in full-force. No change is expected now, as we reach the end of the year.
  5. US final GDP: Thursday, 13:30. The second read of US GDP was quite positive: an upgrade to 3.3% annualized growth, better than expected. The third and final read is expected to confirm this growth rate, the second consecutive quarter of over 3% GDP growth.
  6. US durable goods orders: Friday, 13:30. Sales of durable goods feed into GDP and the Fed also watches them carefully to understand the potential for future growth. Headline orders slipped by 0.8% in the final read for October and are expected to rise by 2% now. Core orders carry expectations for a rise of 0.5% after 0.9% beforehand. The data impacts Q4 growth projections.
  7. US Core PCE: Friday, 13:30. The Fed’s favourite measure of inflation ticked up to 1.4% y/y in October. However, given the most recent Core CPI number, we can predict a slide back to 1.3%, too far below the 2% target that the Fed has.
  8. Canadian GDP: Friday, 13:30. Canada enjoyed an excellent first half to the year but the economy wobbled afterwards. The country is unique in publishing GDP data every month. In September, they reported a growth rate of 0.2% m/m. A similar figure is on the cards now.
  9. US new home sales: Friday, 15:00. Sales of new homes jumped to 685K in October, much better than expected. This time, a slide to 652K is on the cards. While sales of new homes consist only a small part of the market, the construction of new homes triggers elevated economic activity.

*All times are GMT

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