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Trader, analyst and instructor with a 6-year experience

The US shines like a diamond (video)

  By Elizaveta Belugina

The past week was less successful for the US dollar than the previous one. Geopolitical risks made investors increase demand for save haven Japanese yen. Australian dollar gained as well as there were some upbeat data from Australia. Higher yields than in Europe make Australian currency attractive for investors.

American economy showed that it’s in good shape. Last week I said that we’ll see whether US GDP actually increased by 4% in Q2 – well as it turned out American economic growth was even stronger – 4.2%.

Another thing worth mentioning is an extraordinary performance of US stocks. S&P 500 has closed at the record highs above the 2,000 mark before profit taking drove it lower by the end of the week. This index has rebounded about 4.6% from this month’s minimum as US economy improves and this outshines the prospect of the Federal Reserve raising interest rates sometime in 2015.

The Fed’s Chair Janet Yellen sounded rather balanced in Jackson Hole: she admitted that American economy is doing better, but suggested that the central bank should conduct deeper analysis of the labor market before rushing into any decisions.

The first week of September will bring more economic data from the US. The most important release is certainly the publication of the August non-farm payrolls and the unemployment rate next Friday. We think that jobs report is on track to deliver the seventh straight month of 200K-plus jobs growth. This will be bullish for USD.

To sum up, fundamentally the greenback will remain strong, especially if we compare the fundamentals for the US dollar with those for the other currencies, like euro and Japanese yen. However, there’s an unwelcome element of uncertainty created by Ukraine which may hold US currency versus yen and Swiss franc.

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