US dollar: outlook for August 1-7
US dollar posted a weekly decline. The dollar index, which measures the value of the greenback versus a basket of currencies, declined by 2%.
Traders started selling American currency after the Federal Reserve’s meeting. The US central bank made it clear that it’s in no hurry to raise interest rates and despite economic recovery, inflation is still low. Moreover, US GDP for Q1 disappointed: according to the first estimate, American economy gained only 1.2% in Q2 versus 2.6% growth expected. As a result, the expectations of higher Fed’s interest rate in the coming months decreased. Interest rate futures see 30% chance that the US central bank will raise interest rates by the year-end, down from 43% on Thursday. Bond traders went even further predicting that the Fed won’t be able to pull off another interest-rate increase until September 2017.
In will certainly take time and good US data before the greenback will be able to start recovering after the disappointment. The Fed’s officials reminded the market that the regulator will keep looking on the incoming economic figures, so the release of American labor market statistics on Friday will be as important as it always is. Analysts believe that US economy added 180K jobs in July after a 287K gain in June. Other important data releases from the United States include ISM manufacturing PMI on Monday, core PCE price index and personal spending on Tuesday, ADP employment report, as well as ISM services PMI on Wednesday.