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US dollar: Weekly outlook

H.S. Borji
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US dollar: Weekly outlook

The US dollar declined against a basket of currencies Monday, as concerns about a weak global economy weighed on the Federal Reserve. Economic data will play a key role in dictating price action this week, as retail sales, business inventories, housing and consumer confidence data are scheduled for release.

The US dollar index, a weighted average of the greenback’s performance against a basket of trade partners’ currencies, declined 0.51 percent to 85.48.

Demand for the greenback waned last week after the minutes of the September Federal Open Market Committee policy meetings revealed concerns about global growth. The global economy is facing strong headwinds in both advanced and emerging economies, prompting the International Monetary Fund to slash its growth forecast this year and next.

The global economy is forecast to grow just 3.3 percent this year, down from the July estimate of 3.4 percent. Growth is forecast at 3.8 percent in 2015, down from a previous estimate of 4 percent.

The United States, meanwhile, is expected to grow 2.2 percent this year and 3.1 percent in 2015.

The US dollar faces a heavy slate of economic data in the second half of the week. On Wednesday the Commerce Department will report on business inventories and retail sales.

Business inventories are forecast to increase 0.4 percent in August, according to a median estimate of economists polled by Bloomberg. Retail sales are forecast to decline 0.1 percent in September, following a 0.6 percent increase the previous month. Excluding automobiles and gas, sales are forecast to rise 0.5 percent.

On Thursday the Board of Governors of the Federal Reserve System will release factory data, which provides a snapshot of goods production in the United States. Industrial production is forecast to rise 0.4 percent in September, following a 0.1 percent decline the previous month. The manufacturing component is forecast to rise 0.4 percent, following a 0.4 percent drop in August.

Capacity utilization, which measures how fully industrial producers are using their resources, is forecast to rise to 79 percent from 78.8 percent.

Separately, the National Association of Home Builders will release the monthly gauge of home builder confidence for October. Confidence levels are forecast to remain unchanged in October, after reaching a nearly nine-year high in September.

The Commerce Department will report on housing starts and building permits on Friday. Housing starts are forecast to rise to a seasonally adjusted annual rate of 1.01 million in September. August starts fell 14.4 percent to 956,000, following a 22.9 percent increase the prior month.

Building permits – a gauge of residential and non-residential building intentions – are forecast to rise to a seasonally adjusted annual rate of 1.027 million. August building permits declined 5.6 percent in August to 998,000, following an 8.6 percent increase the month before.

Reuters and the University of Michigan will close out the week with the monthly consumer sentiment index. The index rose to 84.6 in September, up from 82.5 the month before. Consumer confidence is forecast to remain relatively unchanged in October with a reading of 84.4.

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