The US Dollar was torn between the Fed’s hawkishness and Trump’s troubles, with trade also playing a role. Has the USD correction ended? The second release of US GDP stands out in the last week of August. Here are the highlights for the next week.
President Trump was the center of attention. The week began with Trump criticizing the Fed once again for raising interest rates. He was disappointed that Chair Powell is not a “cheap debt” man. The focus then shifted to his legal troubles. His former personal lawyer testified against him, saying the Trump instructed the payment of hush money to lovers in order to influence the campaign. Both developments weighed on the US Dollar. However, the FOMC Minutes were upbeat and signaled a rate hike. However, in a speech on Friday at Jackson Hole, Fed Chair Powell said that he does not see the economy overheating nor inflation accelerating. In addition, despite ongoing talks, the US went forward with imposing the planned tariffs on $16 billion worth of Chinese goods and China retaliated with tit-for-tat measures. These two developments helped the greenback recover. Brexit talks will now go on continuously, and this helped the pound. Australia’s PM Turnbull is in trouble, and this sent the Australian dollar down. The Canadian dollar continues enjoying optimism on NAFTA that helped it overcome weak retail sales.Updates:
- CB Consumer Confidence: Tuesday, 14:00. The Conference Board’s consumer confidence measure has been upbeat in recent months, standing at 127.4 points in July. The upcoming release for August could be somewhat weaker. We already know that the preliminary gauge from the Universtiy of Michigan dropped. A small drop to 126.6 is on the cards.
- US GDP (second release): Wednesday, 12:30. The initial read for GDP growth for Q2 2018 stood at 4.1% annualized, the fastest growth rate in four years. President Trump took a victory lap on the news. Some attribute part of the robust rate of growth to activity preceding the implementation of the first round of tariffs. A minor downgrade to 4% is projected.
- Canadian GDP: Thursday, 12:30. Canada publishes GDP growth figures every month rather than on a quarterly basis. However, this publication is for June, concluding the second quarter, making the release more significant than usual. Monthly GDP increased by 0.5% in May and will have likely somewhat slowed down in June.
- US Core PCE Price Index: Thursday, 12:30. The Fed’s favorite inflation measure dropped from 2% to 1.9% in June despite an increase in the Core CPI. This time, the advance of Core CPI to 2.4% will likely push this measure, using a different methodology, to 2%.
- Euro-zone CPI (preliminary): Friday, 9:00. The final read for July showed a slight acceleration in inflation: 2.1% on the headline and 1.1% on core inflation. The gap reflects a considerable increase in energy prices. We will now get the preliminary figures for August which will serve as important input for the ECB in its September meeting. A repeat of the same numbers is expected.
*All times are GMT
Our latest podcast is titled Brexit summer blues, trade troubles
- EUR/USD forecast – for everything related to the euro.
- GBP/USD forecast – Pound/dollar analysis
- USD/JPY forecast – the outlook for dollar/yen
- AUD/USD forecast – projections for the Aussie dollar.
- USD/CADc forecast – Canadian dollar predictions
Safe trading!Get the 5 most predictable currency pairs