US Dollar continues its renewed strength
31 July, 2014
After one of its worst performing years the US Dollar has seemingly weakened to the point where traders are willing to take their long term profits and start to re-buy the greenback. Recent unemployment figures have begun to impress and first talks of future interest rate hikes have been murmured by the Fed. Yesterday we saw the release of the latest GDP figures for the USA which had been forecast for a fast improvement from last month’s -2.1% contraction on the annual figure. Analysts had forecast a 3% annual growth figure and actual results in fact exceeded these expectations further posting an impressive figure of 4% annual growth and 2% growth in the last quarter alone. There was further good news as US business spending had increased by 14%, all contributed to a strong dollar rally in afternoon trading.
After a strong start to the day for the dollar is was over to the Federal Reserve at 7pm last night as they announced their latest interest rate decision. The Fed were widely expected to hold rates at historic lows of 0.25% for another month and they did not disappoint. They also announced a $5bn cut back on the pace of its Asset Purchasing Programme as anticipated and overall the dollar was further supported on the back of these decisions. With little UK data at present, buyers of GBP/USD should be wary that a technical correction has begun and we may a short period of dollar strength, bringing down buying rates away from their 6 year highs seen recently.
This morning at 10:00am the focus is on the Euro with Consumer price index figures and the latest unemployment figures to be announced for the Euro-zone. No change is expected from last month so better than expected figures will be required to bolster the struggling single currency. This afternoon the focus is again back on the dollar with jobless claims figures at 1:30pm and Chicago PMI shortly after at 2:45pm.
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