Fed Rate Hike Reinforced On Positive US Data Forecast

On Monday, the Australian dollar dropped to the lowest level in more than 2 months as the Reserve Bank of Australia (RBA) Governor Glenn Stevens hinted for another interest rate cut this year. On Tuesday, the currency continued the down-move to as low as $0.7162, losing 0.8% compared with the last settlement, dragged down by a fall in oil prices that reduced the demand for commodity currencies.

Meanwhile, the sterling went up against the euro and the dollar on Tuesday after a poll showed that the “Remain” camp was given a 13-point leading over the “Leave” one. Before that, the pound had been down strongly after the warnings from Prime Minister David Cameron and finance minister George Osborne that the Brexit could push Britain economy into a long-term recession.

The Canadian dollar witnessed losses against its American counterpart on Friday as oil prices plunged. Also, the speech of Federal Reserve Chair Janet Yellen has supported the expectations of a US interest rate hike in June.

The US dollar gained versus a basket of major currencies after Yellen noted that the Fed could raise the interest rate if the economy picked up as expected and jobs continued to be strengthened.

According to the New York Federal Reserve’s forecast model showed on Friday, the US economy is on its way to grow by 2.2% annualized rate in the second quarter of the year, following the data on durable goods orders and new single-family home sales. The regional Fed indicated on its website that the latest GDP estimate was faster than the 1.7 percent pace calculated a week earlier. This helps to reinforce the possibility that the Fed will raise its rate this summer.

Gold hit the lowest level in 8 weeks on Friday, being under downward pressure of US rate hike expectations. The commodity has been down around 2.5% this week, heading towards the biggest weekly decline since March 25.

The US Consumer Confidence, measuring the level of a composite index based on surveyed households, is expected to be 96.1 in May, up 2.1% in comparison with April’s 94.2. The number of employed people in May released on June 2 is predicted to gain 14.7% at as high as 179,000, from the reading of 156,000 in April. These positive signals helps underline the strong recovery of the US economy, anticipated to boost the greenback to fly higher next week.

On June 2, the ECB press conference will be held, which covers all details that affect the recent monetary policy decision. The Euro is supposed to volatile during the conference as investors try to decode the future interest rate.

The Canadian trade balance is much likely to witness another trade deficit in April as the difference between exported and imported goods is predicted to be -2.6 billion, while the data was recorded at -3.4 billion in March. The local currency is anticipated to continue its downtrend against the greenback on investors’ declining belief on the country’s economy growth.

Leave a Reply

Your email address will not be published. Required fields are marked *