Can US Dollar Extend Its Recent Up-move?

February 22, 2016 11:45

More than four years high of US Core CPI negated neutral communication of the FOMC meeting minute during last week and resurfaced chances of a Fed rate-hike, helping the US Dollar Index (I.USDX) register first positive weekly closing in previous three. The Euro and the GBP, on the other hand, remained negative due to Brexit fears even as the UK Prime Minister announced referendum to vote in June and the EU authorities also passed aid packages to help the Britain maintain Euro-area status. Further, the JPY kept enjoying its northward trajectory amidst the global uncertainty while improvement in Crude prices, mainly driven by dip in US rig counts, helped commodity currencies, namely, AUD, CAD and NZD, maintain their recent advances.

With better inflation figures helping greenback to extend its rise, market players are more likely to look on to this week's US GDP and Consumer Confidence details, coupled with the US Durable Goods Orders and Housing market numbers, in order to forecast the USD's ability to maintain its recent pullback. Moreover, UK's second estimation of Q4 2015 GDP and CPI releases from EU and Germany, in addition to talks relating the Brexit, are some other factors that could continue providing trading opportunities to market players.

US GDP And Consumer Confidence To Direct USD Moves

While improvement in US inflation caused market players to re-think for the Federal Reserve's four-rate hike a year plan, this week's Preliminary US GDP for Q4 2015 and the monthly release of CB Consumer Confidence, in addition to Durable Goods Orders and Housing market details, are some of the catalysts that could help ascertain the greenback's capacity to sustain its recent rise.

Aforementioned graph from the US Bureau of Economic Analysis mentions that the US economic activity is growing slowly during last two quarters of the 2015 while the first estimation of Q4 2015 GDP growth marked 0.7% figure against the 0.8% forecast & 2.0% prior. The Preliminary or Second estimation for the last quarter GDP growth of 2015, scheduled for release on Friday, is likely being lesser than its Advance prediction of 0.7% with 0.4% growth mark. Further, monthly releases of CB Consumer Confidence and the Durable Goods Orders, up for publish on Tuesday and Thursday respectively, are showing mixed signals as the consumer confidence gauge is expected to print 97.4 number against 98.1 prior while the durable goods orders may reverse its previous contraction of -5.0% with +3.0% growth. Moreover, the Core Durable Goods Orders number could also reimburse its earlier loss of -1.0% with +0.2% mark.

In addition to these headline numbers, the Existing and New Home Sales figures, to be released on Tuesday and Wednesday respectively, could also offer some insights to the USD traders. Both these housing market details are likely registering downbeat figures with the Existing Home Sales consensus favoring 5.37M against 5.46M prior and the New Home Sales forecast indicating 522K versus the 544K marked in the previous month.

Even as the Durable Goods Orders favor continuation of USD up-move, rest all economic details, headed by the GDP, indicate soft prints and can continue raising bars for the Federal Reserve in their rate-hike plan, which in-turn can drag the greenback down if the actual releases match their downbeat forecasts.

After PMIs, CPI Releases To Help Forecast EUR Trend

Following downbeat readings of Flash Manufacturing and Services PMIs from EU, Germany and France, Euro traders are expected to wait for Thursday's EU Final CPI and monthly release of German Preliminary CPI, up for Friday release, in order to predict near-term trend of the regional currency. While EU CPI is likely confirming its 0.4% Flash reading, the German inflation mark might reverse its -0.8% print with +0.6% figure.

Although Inflation statistics favor EUR recovery, on-going talks of Britain leaving the EU, which bears the support of some influential UK leaders, can provide greater damage to the regional currency.

GBP Traders Should Look For UK GDP And The 'Brexit' Developments

Talks concerning the Britain departing from Euro-area presently remain on the top of the EUR and GBP traders' minds even if the UK PM asked for referendum to vote on the same during the June month as some of the influential leaders from Britain favor the move-out from the struggling regional economy. However, the EU leaders are trying their best to keep the nation in the region by offering them all possible aid packages. Moving on, the Second estimation of UK GDP, scheduled for Thursday release, is likely to remain stagnant with 0.5% growth rate.

Should there be an increase in 'Brexit' supporters, chances of the UK GDP being helpless to reverse recent GBP downside, unless being drastically upbeat, can't be denied.

New-Zealand Trade Balance and Japanese Inflation Figures Are The Rest To Watch

Other than the top-notch readings from US, UK and EU, monthly Trade Balance numbers from New-Zealand and Japanese Inflation figures, out for Friday, are the rest of economics to track for the global forex traders. While forecasts for the New-Zealand Trade Balance depict increase deficit of -250M against -53M prior, the Tokyo Core CPI is expected to reverse its previous -0.1% decline with +0.0% mark and the Japanese National Core CPI could print -0.2% mark against +0.1% prior. With the commodity prices again on their south-run, chances of increased trade deficit driving down the NZD becomes brighter while global uncertainty and an improvement in Japanese inflation indices might continue propelling the JPY higher.

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