Browsing: US Dollar Forecast

US dollar forecast: Preview for the Forex events that will rock currencies ► focusing on major events and especially on publications in the USA, moving the US dollar (greenback). Here is some general information. Scroll down for the latest US dollar outlook

USD and forex general characteristics

The United States Dollar is the reserve currency of the world. The dollar is the currency of choice for oil prices as well as other commodities. Foreign exchange pairs are divided into majors, minors, and crosses. Both majors and minors include the USD.

US events influence currencies more than any other event. The decisions and statements of Federal Reserve officials and economic developments in the US make the biggest waves. The US economy is the biggest 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 had 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 bit 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 the dearth of details. The summer hurricanes and doubts about the tax plan limit the dollar’s gains.

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.

Latest weekly US Dollar forecast

The US dollar enjoyed some strength thanks to the Fed’s hawkish hike, but this did not last too long. What’s next? The Fed can continue influencing currencies thanks to speeches from top Fed officials, including Yellen. In addition, we have many other central bankers speaking and also some GDP figures. Here are the highlights for the upcoming week.

The US dollar enjoyed some hawkish words from Dudley, No. 3 at the Fed. However, the dollar’s ascent wasn’t one sided. Worries about inflation from Evans and Harker kept the dollar from advancing. Markets remain sceptical about further hikes. The pound had a volatile week, sent lower by Carney, lifted by Haldane and rocked by political uncertainty and the beginning of Brexit talks. Oil prices were on the decline, reaching 7-month lows, but the Canadian dollar did not follow oil that closely. The euro struggled against the dollar amid reports of delaying the announcement of QE tapering.

Updates:
  1. US Durable Goods Orders: Monday, 12:30. Orders of durable goods feed into GDP readings and also reflect investment. Back in April, the volume of orders slipped by 0.8%. Another slide, this time of 0.5%, is on the cards. Core orders, which are of interest to the Fed, dropped by 0.5%. A rise of 0.4% is on the cards for core orders.
  2. Mario Draghi talks: Monday, 17:30 and Tuesday at 8:00. The president of the ECB participates in an event in Sintra, Portugal. Amid reports that the announcement about QE tapering will have to wait for a long time, Draghi could provide clarifications. If he expressed worries about inflation, it will help keep the euro in check as well. If he focuses on strong growth, the euro could rise.
  3. Mark Carney talks: Tuesday, 10:00. The Governor of the BOE will present the Financial Stability Report and will speak at a press conference. Amid rising inflation, some of Carney’s peers have expressed a desire for raising rates. While the topic is not interest rates, any comments about them will rock the pound. He recently ruled it out.
  4. US CB Consumer Confidence: Tuesday, 14:00. The Conference Board’s consumer confidence measure is gradually declining from the highs, settling at 117.9 in May. These are still high levels, but the decline is somewhat worrying. A small drop to 116.1 is on the cards.
  5. Patrick Harker talks Tuesday, 15:15. The President of the Philadelphia Fed will speak in London. In his previous public appearance, Harker surprised by expressing some worries about inflation. Will he repeat this stance? His speech serves as a warm up for Yellen, who follows up at the same event.
  6. Janet Yellen talks: Tuesday, 17:00. The Chair of the Federal Reserve expressed lots of optimism about growth and employment while dismissing inflation on one-off events. Since the rate decision, we had other Fed speakers such as Evans and Harker expressing concern, while Dudley doubled down on Yellen’s comments. Will she repeat her hawkish stance and boost the greenback? Or will she face reality?
  7. Central bankers panel: Wednesday, 13:30. Four governors will participate in a panel at Sintra: the ECB’s Mario Draghi, the BOE’s Mark Carney, the BOJ’s Haruhiko Kuroda and the BOC’s Stephen Poloz all talk at one event. While some of them will have had separate events to talk at, this will be an opportunity to tackle worries about inflation all at once.
  8. US Pending Home Sales: Wednesday, 14:00. While sales of new and existing homes are quite stable, pending home sales are squeezing in the past two months. They dropped by 1.3% in May. A rise of 0.6% is on the cards.
  9. Crude Oil Inventories: Wednesday, 14:30. With oil prices tumbling down to 7-month lows, every inventory release matters. There is also a growing inverse correlation with the US dollar.
  10. US GDP (final): Thursday, 12:30. The second release of GDP was somewhat encouraging: annualized growth was revised up to 1.2% from the very poor 0.7% reported in the first release. A confirmation of the 1.2% growth rate is expected.
  11. UK GDP (final): Friday, 8:30. After the EU Referendum a year ago, the UK economy continued enjoyed robust growth throughout the year. However, the first quarter already saw a significant slowdown. In the second read of Q1 GDP, q/q growth was downgraded from 0.3% to 0.2%. We now get the final read which is projected to confirm the 0.2% read.
  12. Euro-zone inflation: Friday, 9:00. The European Central Bank has only one mandate: inflation. The flash read of inflation is closely watched and impacts the euro. Back in May, headline CPI advanced by 1.4% y/y while core inflation slipped under 1% down to 0.9%. Headline inflation carries expectations for a slide to 1.3% while core inflation is forecast to advance to 1%.
  13. US Core PCE Price Index: Friday, 12:30. This is the favourite inflation measure of the Federal Reserve, and it has been sliding. After edging closer to the 2% target, the measure slipped down to 1.5% y/y. Another drop is expected now, probably to 1.3% if the Core PCE follows the Core CPI. Month over month, a rise of 0.1% is predicted.
  14. Canadian GDP: Friday, 12:30. Canada reports its GDP on a monthly basis, so this time we get a look into Q2, with this report for April. Back in March, the economy grew by no less than 0.5%, encouraging the central bank to change its stance to hawkish. Can growth continue?

*All times are GMT

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