The Greenback was the top boss in last week’s trading. Will this week’s top-tier reports keep the momentum going for the dollar?
Retail sales (July 16, 1:30 pm GMT)
Consumer spending shot up by a solid 0.8% in the month of May, which is twice the 0.4% uptick that many had expected.
Apparently, auto and gasoline sales made up the bulk of the gains, while clothing and building materials sales also showed strength.
Analysts only expect a 0.4% growth in June, while core CPI is also expected to slow down from 0.9% to 0.4%.
A weaker-than-expected reading could inspire a mini reversal for major dollar friends especially if there are no other catalysts to influence sentiment in the markets.
Last Week’s Price Review
The Greenback is the top-performing currency of the week (as of 5:00 pm GMT), which is a reversal of fortune since the Greenback was last week’s main loser.
The Greenback had a rather weak start. There were no apparent catalysts but as noted in Monday’s London session recap, market analysts were blaming the Greenback’s weakness on weaker-than-expected wage growth from last week’s NFP report, as well as higher demand for the Chinese yuan and higher-yielding currencies like the Kiwi and the Aussie, which sapped demand for the Greenback.
The Greenback later perked up during Monday’s U.S. session, though. There were no direct catalysts for the Greenback, but some market analysts were suggesting that the Greenback was feeding off the pound’s weakness in the wake of Boris Johnson’s resignation as British Foreign Minister.
In any case, the Greenback then continued to move higher on Tuesday. There were no direct catalysts for the Greenback again. But as mentioned in Tuesday’s London session recap, some market analysts suggested relief buying since the market supposedly thinks that the negative effects of a trade war have yet to manifest themselves.
The Greenback later dipped broadly during Tuesday’s U.S. session, but there was no apparent reason for that.
Greenback bulls would return later on when rumors began to spread that the U.S. will escalate the trade war with China by publishing a list of $200 billion worth of Chinese goods that will be subjected to additional tariffs.
The Greenback did have a hard time against the yen, though, since the yen also benefitted from those rumors. But even the yen was was forced to bend the knee to the almighty Greenback’s advance come Wednesday.
Sellers would later try to kick the Greenback lower after the Wall Street Journal reported about China’s plans to retaliate against the U.S.
Dip demand was ever-present, though, so the Greenback quickly recovered from the dip. It also probably helped that the U.S. released positive mid-tier data around that time.
However, the Greenback would later fire its booster rockets after Chicago Fed President Evans shifted to a more hawkish stance during an interview.
The Greenback’s flight eventually stalled (except on USD/JPY) when Thursday’s Asian session rolled around, though, likely because of profit-taking ahead of the U.S. CPI report.
Greenback bulls did appear to return during the London session. And some market analysts suggested that may have been due to preemptive buying ahead of the CPI report. At any rate, the Greenback also clearly got a boost when Cleveland Fed President Loretta Mester commented that “The [U.S.] economy can certainly handle two more increases this year.”
Going back to the June CPI report, that unfortunately failed to meet the market’s expectations, so the Greenback began to encounter sellers.
However, Greenback bulls were later revived when Philadelphia Fed President Patrick Harker echoed the same hawkish views as Mester and Evans, although Harker was a bit more cautious.
And as icing on the cake, Fed Head Powell also got some press time and he was rather optimistic about the U.S. economy.
After that, the Greenback’s rally lost steam during Friday’s Asian session, but eventually resumed during Friday’s London session.
And as noted in Friday’s London session recap, there were no apparent catalysts for the Greenback’s continued rise, but market analysts were pointing to safe-haven demand for the Greenback due to lingering trade-related fears, as well as strong rate hike expectations since the CPI report were apparently not enough to derail expectations for further hikes.
The Greenback later dipped during Friday’s U.S. session, likely because of profit-taking after a good week.