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U.S Dollar Snaps Back On Good Data, FOMC Next Week

By Kathy LienForexApr 23, 2021 03:33PM ET
www.investing.com/analysis/us-dollar-snaps-back-on-good-data-fomc-next-week-200574993
U.S Dollar Snaps Back On Good Data, FOMC Next Week
By Kathy Lien   |  Apr 23, 2021 03:33PM ET
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The U.S. dollar performed extremely well in the first quarter of 2021, but the second quarter, so far, has been more challenging. Since the beginning of the month, investors have been selling U.S. dollars. Despite the recovery, the Federal Reserve said it is committed to keeping monetary policy easy, and this stubbornness capped the rally in Treasury yields and the U.S. dollar. This outlook will be revisited in the coming week, with the Federal Reserve’s monetary policy announcement and first quarter GDP report scheduled for release. Strong Markit PMIs, robust new home sales and a sharp rise in average prices shines a light on the strength of the U.S. recovery. In light of these reports, it will be difficult for the Fed to convince the market that rates won’t increase until 2023. The Bank of Canada has already brought forward its rate hike projections, and the U.S. recovery is more robust and far along compared with Canada’s. Q1 GDP growth should be hot, so even if the Fed leaves its guidance unchanged, investors could position for earlier tightening.

The three greatest risks for the U.S. dollar this year are taxes, recoveries abroad and unexpected vaccine concerns. When the CDC and FDA suspended the use of the Johnson & Johnson (NYSE:JNJ) vaccine, the greenback sold off across the board. Talk of higher taxes by U.S. President Joe Biden accelerated the losses and, eventually the U.S. recovery will slow and recoveries abroad will gain momentum. For now, however, there is a greater chance of gains than losses for the U.S. dollar this coming week with Q1 GDP and FOMC on the calendar.

The euro traded higher against the U.S. dollar on Friday on the back of strong PMIs. It has become very clear that despite rising virus cases and widespread lockdowns, the Eurozone recovery is gaining momentum. Although Germany’s manufacturing and service PMIs slipped slightly, the country’s composite index along with the indices for France and the region as a whole increased. The Eurozone composite rose to its highest level since July of last year. Germany’s IFO report is scheduled for release on Monday and these improvements in economic activity should be accompanied by stronger business confidence.

Sterling failed to rally despite strong retail sales and PMIs. UK consumer spending rose 5.4% in the month of March, more than three times stronger than forecast. Excluding fuel costs, spending grew 4.9%. Manufacturing, services and the composite PMIs climbed above 60 in April, the first time in more than a year for all three indices. These reports should be overwhelmingly positive for GBP, but sterling could barely muster a rally.

The Australian economy is also gaining momentum, with faster manufacturing and service sector activity. With that said, Australia’s Perth region entered a three-day lockdown after a second COVID-19 case. The New Zealand and Canadian dollars ended the day unchanged. USD/CAD has seen very little follow through after this week’s hawkish Bank of Canada announcement. Part of this had to do with positioning, as there are high levels of USD/CAD short positions. Canadian retail sales and monthly GDP numbers are due for release next week.

U.S Dollar Snaps Back On Good Data, FOMC Next Week
 

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U.S Dollar Snaps Back On Good Data, FOMC Next Week

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Comments (17)
Angela White
Angela White Apr 25, 2021 12:28AM ET
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i wanna buy a bitcoin
Kumar Malcolm
Kumar Malcolm Apr 25, 2021 12:28AM ET
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ok when you want it
Gene Kret
Gene Kret Apr 24, 2021 1:49PM ET
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Buy TSLA
ahmad nawaz
ahmad nawaz Apr 24, 2021 11:00AM ET
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Euro / US
ahmad nawaz
ahmad nawaz Apr 24, 2021 10:59AM ET
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should it go up from current position or come out....?
ahmad nawaz
ahmad nawaz Apr 24, 2021 10:58AM ET
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should it go up from 1.2100..?
ahmad nawaz
ahmad nawaz Apr 24, 2021 10:58AM ET
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should it go up from 1.2100..?
Patron Silver
Patron Silver Apr 24, 2021 12:56AM ET
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I'm buying EEM come Monday
Mustafa Aktas
Mustafa Aktas Apr 23, 2021 10:30PM ET
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Next week usd up
ahmad nawaz
ahmad nawaz Apr 23, 2021 10:30PM ET
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is it possible...should it cross 1.21000
Alfa Luso
AlfaLuso Apr 23, 2021 7:46PM ET
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Aren't you tired of never being right? Most of your articles feature a "strong" dollar, going up, all is well, gaining momentum, etc.... And week after week the EUR ends up and the dollar down! Most of us were looking for EURUSD parity and it's now 1,21!! It's time you try something else, no?
Adil Khan
Adil Khan Apr 23, 2021 7:46PM ET
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Lol
sivenathi Gaulani
sivenathi Gaulani Apr 23, 2021 7:46PM ET
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Why do you continue reading her articles then? it's time for you to start writing n reading you own articles ''Prophet AlfaLuso''. she is not a Prophetess like you are...just go and learn how to manage risk and leave her alone.
Moch Arif
Moch Arif Apr 23, 2021 7:46PM ET
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that's right fella,poor all of her investors...
Abdoo Biskar
Abdoo Biskar Apr 23, 2021 6:49PM ET
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🇲🇦🇲🇦🇲🇦💗💗✍️💌🤝💯👍🏻
Kevin Avila
Kevin Avila Apr 23, 2021 6:40PM ET
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Good analysis. Thank you. Im projecting dollar strength next week.
Mir Chang
Mir Chang Apr 23, 2021 6:40PM ET
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Fed must lower their bond buying or else im taking already massive hits going long usd.
the Grim pacifist
the Grim pacifist Apr 23, 2021 6:10PM ET
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so what do you think about the GDP numbers and retail sales ,any headsup
Mir Chang
Mir Chang Apr 23, 2021 6:10PM ET
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Gdp wont drop too much bonds buying. Inflation on retail sales are just from stim boosting and inflating 2% target then powell will lower bond buying and QE, raise rates sooner than expected. And usd bulls will smooth sail
Stan Smith
Stan Smith Apr 23, 2021 3:27PM ET
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??? DX is dropping like a millstone
Kevin McCarthy
Kevin McCarthy Apr 23, 2021 1:46PM ET
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Canada doesn't have the debt the US has. a rate increases by 2023 is unlikely for us. if anything, I'm still waiting until the next cut. German economy looks better than the US shell game we're playing. we don't produce enough. ballooning trade deficit and liberal policies will bankrupt this country. all the great data is really bad. Housing market is in shambles. only people buying houses are people trying to hold real estate as a commodity to sell later. no one is checking the houses to see if anyone is living in them. A few people own many properties while most of America can't afford to own. I hoped we can make it to the next administration, and they care about America enough to save us and not just the US.
Mir Chang
Mir Chang Apr 23, 2021 1:46PM ET
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Green energy oil prices and hot housing market leading cad to a bubble. 2T C$ gdp very soon.
Fedex Ultra
Fedex Ultra Apr 23, 2021 1:46PM ET
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liberal policies? lol "conservatives"(corporatists) have been giving huge tax cuts and that's what has been increasing the deficit. open you eyes...
Jimmy Smith
Jimmy Smith Apr 23, 2021 1:46PM ET
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Those who work deserve tax cuts, not leeching liberal dependents of government and society.
Ghulam Abbas
GhulamAbbas Apr 23, 2021 1:45PM ET
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Good And thanks
Hagios Stewart
Hagios Stewart Apr 23, 2021 1:22PM ET
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Great.Thank you
Okito Kelvin
Okito Kelvin Apr 23, 2021 1:13PM ET
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nice
 
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