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US Dollar Holds Firm as Data Continue to Disappoint

H.S. Borji
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US Dollar Holds Firm as Data Continue to Disappoint

The US dollar advanced against a basket of currencies Friday and is pacing for a weekly gain of 0.5 percent, as investors weighed monetary policy and geopolitical tensions against disappointing US data.

The US dollar index, which gauges the performance of the greenback against a basket of major rivals, advanced 0.12 percent to 80.60.

The dollar index has been gradually rising since Tuesday, after Congressional testimony from Federal Reserve Chair Janet Yellen suggested the central bank could begin raising rates sooner than forecast if the labour market continues to improve at a strong pace.

“If the labor market continues to improve more quickly than anticipated by the Committee, resulting in faster convergence toward our dual objectives, then increases in the federal funds rate target likely would occur sooner and be more rapid than currently envisioned,” Yellen said in a speech on Tuesday.
The dollar remained elevated despite weaker than forecast consumer sentiment data.

US consumer confidence declined in July, as the index of expectations weakened for a third consecutive month. The Reuters/University of Michigan consumer sentiment index dipped from 82.5 to 81.3 in July. Economists forecast an increase to 83.

“The most remarkable aspect of recent trends in consumer confidence has been its resistance to change in either direction due to very negative GDP nor very positive,” said survey director Richard Curtin in a press release.

Consumer sentiment has remained relatively steady amid a spate of economic data releases that have painted a mixed picture of US recovery. The US economy contracted at an annual rate of 2.9 percent in the first quarter, the Commerce Department confirmed last month.

Meanwhile, the economy has enjoyed its longest stretch of job creation in more than 14 years. US employers have added more than 200,000 nonfarm payrolls per month in each of the last five months, as the unemployment rate dipped to 6.1 percent.

A separate release from the Conference Board today suggested the US economy may accelerate at a faster rate in the second half of the year. The Conference Board’s leading economic index for the US increased 0.3 percent to 102.2 in June, following a 0.7 percent gain the previous month.

However, the increase missed the consensus estimate of 0.5 percent.

The Conference Board cited housing permits as a major concern that could dampen the improving outlook. Building permits – a gauge of residential construction intentions – declined 4.2 percent in June to a seasonally adjusted annual rate of 963,000, the Commerce Department reported earlier this week.

In currency news, the USDJPY edged higher, but the gains were limited amid heightened tensions in Eastern Europe after a Malaysian Airlines passenger plane was shot down over Ukraine, killing all 298 people on board.

The USDJPY advanced 0.2 percent to 101.38. The pair faces initial support at 100.97 and resistance at 101.55.

The EURUSD declined 0.11 percent to 1.3511, rebounding from an intraday low of 1.3492. The pair faces immediate support at 1.3514 and resistance at 1.3539. The EURUSD is trading below the 200-day simple moving average of 1.3526.

The GBPUSD declined 0.17 percent to 1.7070 amid a quiet UK release schedule. The pair faces initial support at 1.7050 and resistance at 1.7136.

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