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Currency Analyst since 2010

USD: a spot on the sun (video)

By Elizaveta Belugina

Last week US dollar has made powerful moves up versus euro, British pound, Swiss franc and Japanese yen. At the same time, the greenback was less strong versus commodity currencies, and especially against Australian dollar.

Job creation in America hit 8-month low: August Non-Farm Payrolls (NFP) came at only 142K, while economists expected reading of more than 200K.

In our view, one worse NFP release doesn’t change the whole picture and won’t derail the Federal Reserve from its current course. There’s still general understanding that the Fed will raise rates earlier than other central banks, and the market will be still expecting a rate hike in the middle of 2015. This provides fundamental support for USD. At the same time, sentiment about the US dollar will likely cool in the coming days. The possibility of a more hawkish tone at the Fed’s Sept. meeting has declined, and the greenback may find itself under some pressure versus the higher-yielding currencies like AUD. Still, although US dollar is oversold, so far its correction was very modest, especially against euro, pound and franc.

As for the US economic calendar, it’s rather empty until Friday when America releases retail sales, so there will be nothing that could seriously hurt USD.

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