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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

The dollar suffered across the board in the second week of 2018. Will it remain under pressure? The upcoming week features housing data and consumer confidence from the US, Chinese GDP, and other market-moving events.  Here are the highlights for the upcoming week.

A report that China will slow or halt buying of US Treasuries sent the dollar down. A half-denial helped the greenback make a recovery of sorts, but the damage was done, especially against the yen. The US dollar dropped even more sharply at the end of the week, despite the inflation report come out slightly above expectations. USD/JPY also suffered a “mini taper tantrum” from the BOJ. Unimpressive inflation figures didn’t help. The euro enjoyed upbeat meeting minutes from the ECB while the pound remained stable despite worrying data from the UK. The Aussie continued gradually higher and the Canadian dollar could not capitalize on the rise in oil prices, that reached the highest levels in over 3 years.

Updates:
  1. UK inflation report:  Tuesday, 9:30. Britain stands out among developed countries by suffering from elevated inflation. Year over year CPI surpassed the 3% threshold in the reading for November, above the 1-3% range. Rising inflation has already triggered a rate hike in November, but the BOE seems reluctant to make additional tightening given the uncertainty resulting from Brexit and the slowing economy. Another rise in this important report that concludes 2017 may force the BOE to rethink. A small drop to 3% is expected.
  2. Empire State Manufacturing Index: Tuesday, 13:30. This is an early report about the manufacturing sector, for the month of January 2018. In many cases, the publication is overshadowed by other indicators, but this time, it has its own space. The score slipped to 18 points in December after reaching much higher levels beforehand. A level of 18.5 is predicted.
  3. Canadian rate decision: Wednesday, 15:00. The Bank of Canada is expected to raise interest rates for the third time in this cycle, from 1% to 1.25%. In the previous rate decision, it seemed like BOC Governor and his team were in for a long pause after normalizing rates back to 1% in mid-2017. However, recent economic data has been quite impressive: the economy gained some 79K positions in both November and December. The recent BOC Business survey was quite bullish, pointing to rapid expansion. Alongside a significant rise in oil prices, the time seems ripe for tightening by the Ottawa-based institution. A surprise “no-change” will hurt the C$. A rate hike is basically priced in and the response in case of a hike will depend on the prospects for further moves.
  4. Australian jobs report: Thursday, 00:30. Australia enjoyed an excellent gain in jobs in November: 61.6K, a big jump after a very modest rise in October. The unemployment rate remained at 5.4%, pausing after two consecutive drops. Another gain is likely for the month of December. A modest gain of 15.2K jobs is on the cards. The unemployment rate carries expectations for remaining at 5.4%.
  5. Chinese GDP: Thursday, 2:00. China is the world’s second-largest economy and the development of its economic growth impacts the whole world. Back in Q3, the Middle Kingdom grew 6.8% y/y, in line with the government’s wishes and market expectations. While many doubt the numbers, released relatively shortly after the quarter ends and with no revisions, the publication is watched by the whole world. Note that China also releases other data with industrial output standing out. A minor slide to 6.7% is forecast.
  6. US housing data: Thursday, 13:30. Both building permits and housing starts stood an annualized level of 1.3 million in November, both beating expectations and reaching new highs. The positive data helped the greenback at the time. Things are not always this way: at times, one figure came out above predictions while the other disappointed, making no market impact. Will we see new highs now? If the figures offset each other, the dollar could move by the other two noteworthy numbers released at the same time: jobless claims and the Philly Fed manufacturing index, but the housing indicators are of higher importance. Building permits are projected to slide to 1.29 million while housing starts are predicted to drop to 1.27 million units annualized.
  7. Crude Oil Inventories: Thursday, 16:00. Inventories of crude oil have been falling in the past 8 weeks, contributing to the rise in oil prices, even as distillates have not always seen a drawdown. With the prices of black gold hitting new highs, this release is important not only for loonie traders but also for the US dollar: there is often an inverse correlation between oil prices and the greenback.
  8. US consumer sentiment: Friday, 15:00. The preliminary release of consumer sentiment by the University of Michigan has the last word of the week. Consumers are slightly less confident in the past two months, with the index hitting 95.9 points in the final read for December. The initial publication for January gives us a first look into 2018. Note that consumption is not always well-correlated with consumer confidence. A score of 97.2 is expected.

*All times are GMT

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