Browsing: US Dollar Forecast

Global markets struggled as signs of an upcoming recession grew. The next moves depend on the Federal Reserve, with the FOMC minutes and Chair Jerome Powell´s speech standing out. Here the highlights for the next week.

The German economy contracted and may be entering a recession. Chinese industrial production growth grew at the slowest since 2002. And US yields have inverted – scaring investors of a recession in the world´s largest economy. Other economic indicators were mixed, with US retail sales rising more than expected but consumer confidence falling.

  1. Canadian inflation report: Wednesday, 12:30. Canada’s Consumer Price Index has been more robust than in several other developed economies with the Media CPI and the rimmed CPI standing at 2.2% and 2.1% respectively – above the target of 2%. However, headline prices dropped by 0.2% in June. An increase of 0.1% is on the cards for July. Core Median CPI is projected to slow to 2.1%, Trimmed CPI to 2%, and the Common CPI to 1.8%.
  2. FOMC Meeting Minutes: Wednesday, 18:00. How worried are Federal Reserve officials? The question refers to trade tensions and subdued inflation – the factors that resulted in the Fed’s decision to lower rates on July 31st – the meeting that the minutes provides details of. Two voting members dissented and voted against slashing rates and markets will want to know if these hawks were joined by others or if doves on the sidelines wanted even more. While some see the document as stale, it is essential to remember that it is revised until the last moment, with officials aware that markets are watching.
  3. Euro-zone PMIs Thursday, 7:15 for France, 7:30 for Germany, and 8:00 for the whole euro-zone. European economies are slowing down and some are already contracting. Is a recession on the cards? Markit’s forward-looking survey has shown that the manufacturing sector is contracting – driven by German weakness. The largest economy’s manufacturing Purchasing Managers’ Index (PMI) tends to have the greatest impact on the euro, but also data from France moves markets.
  4. ECB Meeting Minutes: Thursday, 11:30. The European Central Bank is set to announce a significant stimulus package in its September meeting, including a rate cut and perhaps a resumption of the bond-buying program. It laid the ground for such a move in its July meeting – and we will now receive details about the Frankfurt-based institution’s expected move. Similar to the Fed’s document, the ECB is well-aware that markets are examining every word and they will work to send a clear message about their intentions.
  5. Jerome Powell speaks Friday, 14:00. While the FOMC minutes may be dismissed by some as stale, the all-important speech by the Fed Chair is certainly up-to-date. Powell talks at Jackson Hole, Wyoming, at an annual event that has yielded substantial market movements in past editions. The most important question on investors minds is: will the Fed cut interest rates in September? In July’s decision, Powell reiterated that the rate reduction is only an “insurance cut” and not the beginning of a cycle. However, global markets have struggled since then, the yield curve has shown signs of a recession, and other countries reported economic weakness. The US dollar may suffer if he hints of a rate cut on September 18th and will rise if he dismisses such an option. Powell is unlikely to be explicit, but markets will examine every word and create an instant narrative.

*All times are GMT

Follow us on Sticher or iTunes

Further reading:

Safe trading!

Get the 5 most predictable currency pairs

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

1 2 3 45