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Fed, Economic Data, Safe-Haven Buying Boosts Dollar Index Last Week

James Hyerczyk
A hawkish Federal Reserve helped drive the greenback higher on Wednesday after the central bank gave an upbeat assessment of the world’s biggest economy and stayed on course to gradually lift interest rates. The U.S. Dollar suffered a slight setback on Friday against a basket of currencies after data showed U.S. job growth slowed in July. Additionally, the greenback also slipped against the Yuan after the Chinese central bank acted to stabilize the currency by stemming speculation against it.

The U.S. Dollar posted a two-sided trade last week against a basket of currencies. The greenback was driven lower Monday and early Tuesday before reversing to the upside. This created enough upside momentum to fuel a three day rally before reversing to the downside on Friday.

For the week, the September U.S. Dollar Index futures contract settled at 94.961, up 0.501 or +0.53%.

The dollar slipped against most major currencies on Monday and early Tuesday on position-squaring and profit-taking ahead of economic data and central bank monetary policy meetings.

On July 30, U.S. Pending Home Sales came in higher than expected, up 0.9% versus a 0.4% forecast.

On July 31, the Core Price Index rose 0.1%, meeting expectations, but coming in below the 0.2% previous reading. The quarterly Employment Cost Index came in up 0.6%, below the 0.7% estimate and 0.8% previous reading.

Personal Spending rose 0.4%, meeting expectations. The previous month was revised higher to 0.5%. Personal Income came in at 0.4%, matching the estimate and previous report.

Chicago PMI came in at 65.5, well above the 61.9 forecast. Conference Board Consumer Confidence rose to 127.4, above the forecast. The previous month was revised higher to 127.1.

A hawkish Federal Reserve helped drive the greenback higher on Wednesday after the central bank gave an upbeat assessment of the world’s biggest economy and stayed on course to gradually lift interest rates.

The Fed kept interest rates unchanged as widely expected, and said U.S. economic growth has been rising strongly and the job market has continued to strengthen.

Additionally, a solid ADP Non-Farm Employment Change report helped raise the chances of further rate hikes by the Fed.

Other reports included Final Manufacturing PMI which came in slightly below expectations at 55.3. ISM Manufacturing PMI was well-off the 59.4 estimate at 58.1. Construction Spending fell 1.1%, but the previous month was boosted to 1.3%. Finally, ISM Manufacturing Prices were 73.2, missing the 75.5 forecast.

The U.S. Dollar surged on Thursday on safe-haven buying after President Donald Trump said he is considering the U.S. raise proposed tariffs on $200 billion of Chinese goods to 25 percent from the 10 percent rate his administration suggested on July 10. China then warned of retaliation if the U.S. followed through with its plan.

Finally, the U.S. Dollar suffered a slight setback on Friday against a basket of currencies after data showed U.S. job growth slowed in July. Additionally, the greenback also slipped against the Yuan after the Chinese central bank acted to stabilize the currency by stemming speculation against it.

This article was originally posted on FX Empire

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