Forex Trading Library

US Dollar gains for the fourth consecutive week

0 360

The ICE Futures US dollar index closed bullish this week, with prices settling on Friday at 95.73, marking a 2-month high. The dollar was supported by broadly improved fundamentals from the US and hawkish rhetoric from FOMC members over the week.

ICE Futures - US Dollar Index (95.52)
ICE Futures – US Dollar Index (95.52) – Source: Bloomberg.com

The US housing markets continued to post a rebound. Last week, new home sales surged 16.60% in the month of April, reversing the declines of a revised 1.30% contraction in March. This was followed by the pending home sales report which jumped 5.10% in April, marking one of the strongest month over month gains since February 2006. It also indicated that the existing home sales in May had likely surged as well, given the strong numbers of mortgage applications and higher demand. Most importantly, prices in the housing markets were driven by home buyers and not investors.

The upbeat housing market data was followed by the monthly durable goods orders, which gained 3.40% on the month in April while the core durable goods orders excluding transport increased 0.40%. On Friday, the bullish data from the US concluded with an upward revision on the first quarter GDP, which now stands at 0.80%, more than the previous estimates of 0.50% increase.

[Tweet “The bullish data from the US concluded with an upward revision on the first quarter GDP”]

Last week also saw Fed voting members James Bullard and Jerome Powell speaking. Both the members reiterated that the financial markets have a more appropriate reading on the chances of a US rate hike in the near-term.

At a speech in Singapore, voting member and St. Louis Fed Governor, Bullard said “I think they read the minutes correctly,” in reference to the April meeting minutes which surprised the markets on the hawkish side. Many Fed members wanted to see the Fed funds rate being hiked as early as June. The FOMC meets next on June 14 and 15. “I’m keeping an open mind; I want to look at the data as it’s available at the meeting,” Bullard said. Echoing similar views, another Fed governor, and FOMC voting member, Jerome Powell said “If incoming data continue to support those expectations, I would see it as appropriate to continue to gradually raise the federal funds rate. Depending on the incoming data and the evolving risks, another rate increase may be appropriate fairly soon.”

The hawkish comments concluded with the Fed Chair, Janet Yellen speaking at an event on Friday. The Fed Chair was more hawkish than expected, stating that “It’s appropriate, and I’ve said this in the past, I think for the Fed to gradually and cautiously increase our overnight interest rate over time and probably in the coming months, such a move would be appropriate.”

The hawkish rhetoric and the better than expected economic reports saw the US dollar continue to rise steadily.

For the week ending May 27th, gold prices slipped 3.14% to a 14-week low at $1212.63 an ounce. EURUSD closed the week with 0.96% declines, settling at $1.1109 on Friday, marking a 9-week low. USDJPY was muted, closing the week fairly flat at 110.18Yen.

Leave A Reply

Your email address will not be published.