Dollar exchange rate corrected after the prolonged increase | IFCM
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Dollar exchange rate corrected after the prolonged increase

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    2023/02/27
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Dear traders, let us review the major economic events of the past week. Last week the US dollar index fell for the first time after twelve weeks of steady growth. In the previous overview we mentioned that no significant macroeconomic data were expected. Perhaps, market participants decided to seize the opportunity and take profits, as the dollar index has already added about 8.5% since the beginning of May. It started to fall on Monday for no apparent reason. The dollar depreciation was naturally accompanied by the euro consolidation. Investors ignored completely the biggest drop in manufacturing activity since 2009: Factory Orders in August fell 5.7% in Germany. This negative data would normally prevent the single currency from strengthening. Among other factors contributing to weakening of the US dollar were the statements made by the chairmen of the regional Fed offices, regarding the unstable growth of the US economy, and that there was no reason to get a move on raising the interest rates. The minutes of Fed Reserve September meeting published on Wednesday contained approximately the same ideas. In general, the greenback fell till Thursday and then stopped falling as weekly positive data on the American labor market were released. Initial Claims remained low, 287 thousand people, whereas it should have been considerably higher according to the estimates. These data disillusioned somewhat the bears.

We believe that the main economic event of this week may become the speech of the Federal Reserve Board chair Janet Yellen on Friday. Important American statistics will start coming out beginning on Wednesday, when Retail Sales in September will be announced. The outlook is negative for the dollar. In theory, the data on industrial production which will be released on Thursday, and are expected to be positive, can make it up. A number of indicators of the US real estate market will come out on Friday: the tentative forecast is also optimistic.

The ECB President Mario Draghi is expected to give his speech on Wednesday. Investors expect him to tell about the planned euro emission. This can have a significant impact on the currency rate. Trade balance and CPI will be released on Thursday. The data are important, but their outlook is neutral. In general, considering the expected events, there is a possibility of a slight decrease of the US dollar index until Wednesday. Further dynamics will depend on arrival of new information. As for other currencies, note that the UK labor market data will be released on Wednesday. In our opinion, its outlook is positive for the pound.

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