US dollar: outlook for August 15-21
Despite good nonfarm payrolls data, it wasn’t a week of strength for the US dollar: riskier currencies were more popular because of good risk sentiment. The greenback is supported by the fact that other major central banks are easing monetary policy, while the US Federal Reserve still claims that it may raise interest rates this year. The Reserve Bank of New Zealand followed the Reserve Bank of Australia and the Bank of England and cut the benchmark interest rate to the record low. However, data on Friday showed that American core retail sales contracted by 0.3% in July, while producer price fell by 0.4%. This was a serious disappointment for the market.
Next week there will be more economic data from the US: building permits, consumer prices, housing starts and industrial production on Tuesday, FOMC meeting minutes on Wednesday and Philadelphia Fed manufacturing index on Thursday.
The minutes will be from July 27 meeting, when American central bank left interest rates unchanged and said risks to the US economy had declined. If the Fed officials try to persuade the market that September is a ‘live’ month when it may raise rates, the US dollar may strengthen a bit, though we don’t think that the market will put much faith into such statements. If the regulator sounds more cautious, the greenback will get under renewed bearish pressure. More sizeable hints on further US monetary policy are expected at the Fed Chair Janet Yellen’s speech in Jackson Hole on August 26. Until then traders are more likely to be bearish than bullish on the US currency.