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The Greenback holds steady after data

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The Greenback holds steady after data

The dollar has been the beacon of strength throughout the week as interest rate differentials has moved in favor of the greenback, as the 10-year yield moved above the 2.75% level.  Yields have backed up as economic data has come in stronger than expected, which could push the Federal Reserve into tapering bond purchases in September.

The change in sentiment started on Wednesday when the Commerce Department released better than expected GDP data.  Growth grew at 1.7% compared to the 1% expected by economists, with business investment as the impetus for the surprise.  GDP for the first quarter of 2013 was revised lower to 1% compared to the initial print of 1.8%, which offset most of the second quarter gains.

On Thursday strong purchasing manager’s reports from China, Europe and the US helped the dollar gain further traction as the report from the ISM was the strongest of the three.  The US ISM PMI notched up a 55.4 gain compared to the 52 expected by economists.

On Wednesday the FOMC met to determine interest rates, and left rates unchanged.  The bond purchase program remained intact, and the Fed declared a dovish statement as they report growth as modest.  The ECB met on Thursday and left interest rates unchanged but stated that rates would remain at current levels or lower for the foreseeable future.

The dollar remained nearly unchanged after of the Department of Labor’s non-farm payroll report, as the Euro tested support earlier in the week.  Momentum has turned lower with the MACD (moving average convergence divergence index) poised to generate a sell signal.  This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread.

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