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 a roll amid strong data and a hawkish hike from the Fed, while the euro stood out with a painful fall. What’s next? A conference featuring top central bankers, two rate decisions, and growing trade issues stand out. Here are the highlights for the upcoming week.

A promising week eventually delivered big time. The Trump-Kim Summit had the world watching but markets hardly reacted. A rise in US inflation did not rock the boat. The Fed raised interest rates and signaled two additional ones. Moreover, Fed Chair Powell was very optimistic on the economy and from 2019, he will hold a press conference after every meeting. Yet this very hawkish hike did not have an immediate effect and the US Dollar exploded only when retail sales beat expectations. The move was especially strong against the euro. The ECB announced that bond-buying will be cut to 15 billion euros a month and then end at the end of the year. However, they also pledged to leave interest rates unchanged through the Summer of 2019 and added carious conditions and concerns, sending the euro down. Trade tensions were never away from the headlines. The breakup of the G-7 Summit without a deal weighed primarily on the Canadian Dollar. When the US imposed tariffs on China and China vowed to retaliate, markets paid a bit more attention. A deterioration to a full-scale trade war could have an adverse impact on stocks, risk currencies, and also the euro and the pound while boosting the yen and also the dollar.

Updates:
  1. Mario Draghi talks Monday, 17:30, Tuesday at 8:00, and Wednesday at 1:#0 in a panel. The President of the European Central Bank will host a conference in Portugal and will make several public appearances. The most important one is on Tuesday. It will be interesting to see if Draghi repeats the dovish message he conveyed in the post-rate decision presser. Another concerned speech, perhaps this time focusing on trade, could weigh on the euro. A focus on growth could help the common currency recover.
  2. US housing data: Tuesday, 12:30. US Building Permits reached a level of 1.36 million annualized units in April and are now expected to tick down to 1.35 million. Housing starts stood at 1.29 million and are projected to advance to 1.31 million in May. In order to have a meaningful reaction, both figures would need to go in the same direction. They occasionally offset each other.
  3. Central bankers panel: Wednesday, 1:30. Fed Chair Jerome Powell, ECB President Mario Draghi, Bank of Japan Governor Haruhiko Kuroda, and RBA Governor Phillip Lowe will all participate in a panel discussion in Portugal, at the ECB’s conference. It will be interesting to hear if any of them and especially Powell, express concern over the deteriorating trade relations in the world. The Fed Chair only mentioned that some business contacts are worried but did not provide his own opinion.
  4. US Existing Home Sales: Wednesday, 14:00. The US housing sector is doing quite well, with a steady level of 5.46 million annualized units sold in April. May is expected to see 5.55 million. Most transactions are of existing, second-hand homes.
  5. New Zealand GDP: Wednesday, 22:45. New Zealand publishes only a final version of GDP growth, without any revisions. Back in Q4 2017, the nation reported a growth rate of 0.6%. A slowdown to 0.5% is on the cards now. Any deviation could have a significant impact on NZD/USD with some potential effects on AUD/USD.
  6. Swiss Rate Decision: Thursday, 7:30. The Swiss National Bank makes rate decisions only once per quarter. Since the SNB infamously removed the floor of 1.2000 under EUR/CHF, it has not changed its policy: the Libor Rate stands at -0.75% and they occasionally intervene to weaken the franc. They are projected to maintain the same policy also in this decision as inflation is far from the target. Any rise in the deep negative rate could also affect the euro.
  7. UK rate decision: Thursday, 11:00. The Bank of England left the interest rate unchanged in May, changing its intentions after data came out worse than expected. The BOE is expected to leave its policy unchanged once again in this meeting which does not include the publication of the Quarterly Inflation Report nor a press conference. The Bank also publishes its meeting minutes at the same time and this will reveal the voting pattern. Back in May, two members voted to raise rates while seven, including Governor Carney, voted to leave it unchanged. The same pattern is on the cards now. The reaction may be relatively muted as the Governor speaks later in the day.
  8. Mark Carney talks: Thursday, 20:15. The Governor of the BOE will deliver an important speech at Mansion House. In the past, he used the occasion to signals changes in monetary policy, sometimes not in line with the thoughts of other members. Any hawkish twist may be treated with suspicion but could still move the pound. Carney speaks at a time when liquidity is low, so any surprise could have an outsized impact.
  9. Canadian inflation and retail sales: Friday, 12:30. The Bank of Canada is optimistic about inflation and the recent wage data has been quite promising. Back in April, headline CPI rose by 0.3% but Core CPI increased by only 0.1%. Other measures of inflation such as  the Common CPI (1.9%), Median CPI (2.1%), and Trimmed CPI (2.1%) are looking good. The report for May provides insights. Canada publishes the retail sales report for April at the same time. While headline inflation advanced by 0.6%, core sales, excluding autos, fell by 0.2%. The double-feature publication is set to move the loonie quite substantially.

*All times are GMT

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