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US Dollar: forecast for May 16 - 20

US Dollar index reached its highest level in 3 weeks after the strong US retail sales data were released on Friday. US retail sales rose by 1.3% versus a 0.3% decline expected, indicating the consumer spending could boost the economy after the early-2016 slowdown. As a result, speculation that the Fed could deliver another rate hike later in year returned to the market. The next FOMC meeting will take place on June 15. 

As for the new week, traders should focus on two key releases. On Friday we’ll watch the US CPI figures. Price growth is expected to have accelerated to 0.4% in April. However, economists at Credit Agricole see a risk of a softer print. April FOMC minutes will draw market attention on Wednesday. However, the June rate hike is currently priced out and the market is unlikely to change its mind ahead of the Brexit referendum. Also watch the Philly Fed manufacturing index and unemployment claims on Thursday. 

We believe that a stronger dataflow could support the greenback, but it clearly won’t be as strong as it was before: the market is much more hesitant about the Fed these days. Continuous USD rally ahead of the June meeting is very unlikely.

By Kira Iukhtenko

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