Dollar Remains Bullish after Positive Economic Data
Last week, markets entered stirs after the minutes of FOMC meeting in April has been released, which showed that the central bank is likely to increase the benchmark rate as early as next month and two rate hikes by the end of this year are reasonable possibility. After the statements on May 18, the US dollar extended its up-move, strengthening against its rivals. The dollar index DXY edged up strongly, hitting the reading of 95.49, a seven-week high. Before the minutes, investors had held a solid expectation that FED would not raise the interest rate too soon as the slow growth in global economy.
Meanwhile, the two-day meeting of G-7 ended on Friday gave some clues that most of officials agreed not to use currency devaluation to spur economic growth as grave drawbacks may come. The European Central Bank stated at this meeting that other stimulus measures but further rate cuts may be applied if required. The Bank of Japan committed not to lower the interest rate anymore, but an increase in sales tax may be deployed instead.
Early this week, the Office for National Statistics reported that British economy did not grow as strongly as expected. For April, the annual rate for consumer price index (CPI) just inched up 0.3%, while analysts had forecast a 0.5% rise in the previous month. After eliminating food, energy, alcohol and tobacco items, the so-called core CPI y/y rose 1.2% last month, compared with the reading of 1.5% in March.
By contrast, US economy grew for a faster pace as CPI data published on Tuesday came in with an increase of 1.1% for one year ending April, better than the 0.9% increase for one year ending March. The core CPI for the start of second quarter in 2016 also climbed up 2.1% on yearly basis.
In Australia, the Bureau of Statistics on May 18 announced that there were 10,800 jobs added in April and the jobless rate still stayed at a two-and-half-year low as 5.7%. The positive data from labor market signaled a slight recovery in this nation’s growth.
The market is awaiting the speech of RBA Governor Glenn Stevens at the Trans-Tasman Business Circule boardroom briefing held in May 23. As the head of the central bank, he has large influences over the monetary policy of Australia than anyone else. The Aussie is expected to witness volatility during his speech as investors try to catch clues of interest rate.
The New Zealand trade balance, measuring the difference in value between imported and exported goods during April, will be announced on Tuesday. The economic surplus is forecast to be 25 million dollars after staying at 117 million dollars the month before. Compared with the same period one year earlier, the overseas merchandise trade surplus posed at 123 million dollars. New Zealand is supposed to face significant slowdown in economy.
Another important event next week is the Bank of Canada policy conference on May 25, held 8 times per year. This is a primary way that the central bank uses to talk about the interest rate policy with the market, resulting in their rate decisions and economic commentaries.
The number of US people who filed for unemployment insurance for the first time during the past week is predicted to be 275,000, down 1.7% compared with the week before. This is one of the crucial indicators of the economy because it is a major consideration for officials steering the country’s monetary policy. The US dollar seems to remain its strong position in the market next week thanks to the support of positive economic data.