Browsing: US Dollar Forecast

After a tumultuous week including the big Brexit battle, escalating trade wars, the NFP, and Powell´s speech, the focus shifts to the ECB and its upcoming stimulus. In addition, US inflation and retail sales stand out.  Here the highlights for the next week.

  1. UK GDP: Monday, 8:30. The British economy contracted by 0.2% in the second quarter – in a “payback” quarter that followed stockpiling related to Brexit. The upcoming report is for July and will provide the first look into the third quarter. After stagnating in June, the economy may have squeezed in July.
  2. UK jobs report Tuesday, 8:30. Back in June, wage growth accelerated and hit a high of 3.7% or 3.9% excluding bonuses. The upbeat salary numbers were only partially dampened by the rise in the unemployment rate from a low level of 3.8% to 3.9%. The report for July will likely show a similar number. The Claimant Count Change, or jobless claims, will likely show another increase.
  3. ECB decision: Thursday, the decision at 11:45, press conference at 12:30. The European Central Bank is set to introduce a significant package of monetary stimulus. The Frankfurt-based institution has already hinted at this in its previous meeting in July. A looming German recession, slowing global demand, and subdued inflation has all pushed the bank to pre-announce a move. A rate cut of 10 basis points from the current deposit rate of -0.40% – already deep in negative territory – is a minimal step and priced in by markets. President Mario Draghi and his dovish colleagues may push for a deeper cut of 20bp or even a resumption of the bond-buying scheme (QE). However, hawks such as Bundesbank President Jens Weidmann will likely push back. The euro may rise if the ECB settles for a minor rate cut – especially if it is accompanied by a tiering system that exempts some banks from lower rates. If the bank goes for a more aggressive move, the common currency has room to fall.
  4. US inflation: Thursday, 12:30. One of the main reasons for the Federal Reserve’s rate cut in July was low inflation. Less than a week ahead of the next Fed decision, it will receive fresh inflation figures for August. Headline Consumer Price Index (CPI) rose by 0.3% in July and Core CPI by 0.3% on a monthly basis and 2.2% on an annual one. An acceleration may cast doubt on the Fed’s intentions to raise rates, while a fall back to 2% or lower may trigger speculation for a more dovish message.
  5. US retail sales: Friday, 12:30. The US consumer has been on a roll in July, with headline sales jumping by 0.7% and core sales by 1%. Consumer confidence measures for August have been mixed, indicating a weaker volume of sales in August. The data also feeds into the Fed decision in the following week.
  6. US Consumer Confidence: Friday, 14:00. The final version of the University of Michigan’s consumer sentiment measure for August has fallen below 90 points – the lowest since October 2016. Consumption has held the economy up in recent months, and worrying forward-looking indicators may trigger further action from the Fed. he preliminary data for September will be watched very closely.

*All times are GMT

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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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