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Trade Concerns Weigh on US Business Optimism – What can we Expect for the US Dollar?

Last week’s high: $1.3311

Last week’s low: $1.3107

USD Struggles despite Hawkish US Federal Reserve – GBP/USD over the past week

The US Dollar (USD) posted a slightly worse performance against Sterling (GBP) last week, rising as investors responded to a hawkish outlook from US Fed Chairman Jerome Powell before falling in response to a surprisingly soft US Philly Fed manufacturing index.

Investors remain optimistic regarding the trajectory of the US Fed, with Powell insisting that the case for continued rate rises was ‘strong’ at the central banking conference in Sintra, Portugal.

This outlook cemented the same hawkish sentiment revealed at last week’s Fed rate meeting, with investors now expecting two more rate increases before the end of the year.

In slightly worse news, however, the US remains in the middle of intense trade negotiations with China and the EU, with uncertainty beginning to weigh on analysts’ expectations for the US economy.

This has manifested in a weaker-than-expected Philadelphia Fed manufacturing index, which contracted in June from a score of 34.4 to 19.9.

This Week for USD: Trade Relations and US PCE Core in the Spotlight

Trade relations will likely dominate headlines this week for the US Dollar, with the ongoing back-and-forth between the US, China, the EU and Canada liable to yield results or escalate into further tariff exchanges.

Funnily enough, signs of escalation could actually benefit the ‘Buck’ like they did last week, with the tariffs capable of driving inflation higher and potentially necessitating a more aggressive stance on monetary policy.

On the data front, Tuesday will feature the US consumer confidence result for June, followed by the durable goods orders results on Wednesday and the GDP and personal consumption expenditure (PCE) readings on Thursday and Friday.

These could go either way, but if last week’s data was any indication, we could see a reduction in confidence in light of the tariff measures.

Key Events

25th June

13:30 US Chicago Fed National Activity Index

15:00 US New Home Sales

15:30 US Dallas Fed Manufacturing Index

26th June

15:00 US CB Consumer Confidence

15:00 US Richmond Fed Manufacturing Index

27th June

13:30 US Goods Trade Balance Advance

13:30 us Durable Goods Orders

28st June

13:30 US Jobless Claims

13:30 US GDP Growth Rate Final Q1

13:30 US PCE Prices Final Q1

16:00 US Kansas Fed Manufacturing Index

29nd June

13:30 US PCE Price Index

13:30 US Personal Income/Spending

15:00 US Michigan Consumer Sentiment Final

 

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Arron Morris
Currency Trader
T: 01442 892 062

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