Robust U.S. data fails to lift the greenback, what's wrong?

16 February, 2017

The strong growth in U.S. retail sales and the surge in consumer prices were expected to continue pushing the U.S. dollar higher on Thursday, but what happened was exactly the opposite, leaving many traders questioning the greenback’s uptrend.

The past 24 hours were very interesting in currency markets, not just on the data front, but even comments from Fed officials who echoed Yellen’s hawkishness. Philadelphia Fed President Patrick Harker, suggested that the economy needs three rate hikes in 2017 without even factoring in President Trump’s fiscal agenda, meanwhile Boston Fed President was more hawkish, saying that the Fed may raise rates by more than the central bank has forecasted.

The only explanation for the dollar to retreat against most of its major peers is that yield spreads failed to expand further. For example, the U.S. – German 10-year yield spread dropped today by 2 basis points to 210 and dropped by almost 3 basis points against the Japanese 10-year yields.

I believe that the slight tick higher in bond prices will be temporary, unless a correction in U.S. equities is due after several days of posting new highs. Very few experts may disagree that valuations are overstretched, and that investors are willing to pay more premium on prospects of aggressive fiscal plans. We can even go further to discuss that bubbles are being formed, and Professor Robert Shiller’s CAPE PE ratio supports this opinion as it approaches 29.  However, bubbles may grow bigger, even much bigger before they burst, if animal spirits continue to drive the rally.

For this reason, I think the dollar may remain a buy on the dip, until there is evidence of U.S. equities retreating.

Today’s U.S. data which includes weekly jobless claims, housing starts, building permits and Philadelphia’s Fed manufacturing index, are not likely to provide any significant impact on the U.S. dollar, so traders should keep focused on performance of U.S. treasuries.  


Source link  
Yuan firms on Dollar weakness

Global investors will likely remain on high alert throughout the end of the week to see if the largest market sell-off since early 2018 will...

EM currency weakness refuses to go away

Tuesday has seen stability in Chinese markets following a very nervous beginning to the new trading week yesterday. Signs of China market stability...

Yuan eases on risk-off sentiment

Financial markets have entered the new trading week on negative footing as a mixture of different market themes weigh on investor sentiment...


Risk assets under pressure from rates

Chinese equities took a big hit after traders returned from a week-long holiday. Efforts by the People's Bank of China to free more than $100 billion...

U.S. Treasury Yields boost the greenback

The U.S. Treasury selloff on Wednesday was the biggest story in the financial markets. This time it wasn't only the rate-sensitive two-year yields that marched higher...

NAFTA deal fails to lift global risk appetite

Global investors remained defensive on Tuesday despite the U.S. and Canada agreeing to a new trade deal ending months of uncertainty...


Dollar steady after Fed raises rates

In a widely expected move, the Federal Reserve has raised its key interest rate by 25 basis points for the third time this year. The central bank...

Markets prepare for Fed meeting

The resumption in concerns around trade uncertainties, the upcoming Federal Reserve policy meeting and general political risk element that...

Could the Dollar be turning the corner?

Currencies throughout Asia have welcomed the news that the Dollar has tumbled to a near 3-month low. A number of different currencies in the...


In the past 24 hours Bitcoin has gained 4.97% and reached $6645.19278191. Open your trading account with the best cryptocurrency brokers on special terms today.

In the past 7 days the EUR/USD pair has gained 0.5919% and is now at $1.1596. Start trading and making money on Forex today.

In the past 7 days Ethereum has lost -8.8% and is now at $209.180805315. Have the most popular cryptocurrencies compared online 24/7.


Top Brokers offering Forex Market Analysis



Forex Currencies Forecasts



Top 10 Forex Brokers 2018

# Broker Review
1easyMarketseasyMarkets91%
2FXTMFXTM88%
3HYCMHYCM87%
4Alfa-ForexAlfa-Forex86%
5FxProFxPro85%
6FIBO GroupFIBO Group84%
7OctaFXOctaFX83%
8HotForexHotForex82%
9FXCMFXCM80%
10AvaTradeAvaTrade77%
  


Share: