The American gets support, despite the weak data on the US
The market completely ignored the weak data on retail sales in favor of the speech of Powell.
- Thus, basic orders for durable goods in the US (m/m) decreased from May last year to -0.3%, against the forecast of 0.4%.
- And the preliminary data on the trade balance of the USA exceeded the deficit since July 2015 -74.40D.
The strengthening of the American was caused by the hawkish comments of the US Federal Reserve Chairman Powell, who spoke in favor of raising rates in the US. Powell noted that the US economy remains strong, and a gradual increase in rates will support the targeted increase in inflation and employment.
As expected, Powell’s rhetoric turned out to be more hawkish than his predecessors Yellen. Also, the market heard hints of a rapid increase in rates in the US. Thus, the probability of raising rates at the March meeting of the US Federal Reserve is estimated at more than 84%. This keeps the opportunity for four rate hikes in 2018.
The US dollar index, despite the growth of optimism, is limited by the highs of last week and a downward trend. As a result, the US dollar may slow down, but the optimism about the rate hike in March continues to persist, which will push investors to buy the American on declines.
Graph of the US dollar index. The current price is 89.90.
Hanzenko Anton