The future seems bleak for the USD

August 19, 2016

The Dollar rebound fizzled out as the July FED Minutes were released on Wednesday. The disenchanted investors revealed bleak prospects for a rate hike this year accordingly. The greenback renewed the bottom on Thursday as futures on the currency were dipping to a 94.31 level, lowest since the end of June.

The protocol of the 26-27 July FOMC meeting signalled that the majority of FED members want to see consistency in the US market growth before raising rates. Some members pointed out possible slack in the US employment in the coming month, though overall outlook of the US growth remained upbeat.

The report cooled the expectations of investors, who boosted their bets on Gold after the New-York FED head William Dudley hinted that in September the FED meeting might hold some surprises for the market. The Futures of a rate hike then priced about a 45% likelihood of a rate hike in the December meeting, declining to a 41.7% on Thursday. This, though may not correspond to the sharp drop of US Dollar as seen in recent days.

The UK Retail Sales data released on Thursday added confidence to the Brexit potential fallout being overestimated. The Retail Sales rose by 5.4% in July compared to the same period in 2015, beating a 3.9% medium estimate. The MoM change also came above estimates with 1.5% headline figures, soothing the concerns of the UKs decision to leave EU. It seems like it does not produce any immediate negative after-effects. The data fueled its advance on the Pound with the GBP/USD climbing to a two-week high at 1.3172.

The Australian Dollar saw a sizzling upward movement on the employment report, which beat the estimates. The July’s employment change averaged around 26.2K with the analysts’ consensus way off the mark being at 10K, while the jobless rate fell 0.1% to a 5.7% comparing to June. The AUD/USD rose the price around 0.47% to a 0.7692 level, with a 0.7723 session peak.

The Commodity currencies were upheld by the Oil gains, which extended the advance after the EIA data showed that the refineries were operated at 93.5%, up by 1% from the previous reading. At the same time, the gasoline stockpiles decreased by 2.7M barrels improving the outlook on crude oil demand. The WTI futures for September delivery stalled near a $47 mark, gaining 0.53% on Thursday, the Brent retreated to 49.82 (-0.08%) after a short stay above the $50 level.

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