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Dollar Gains on Fedspeak

US Dollar Recovers Post-FOMC Losses Closing the Week With Modest Gains

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An upbeat second quarter GDP figure alongside a hawkish narrative from FOMC Members helped the US Dollar maintain most of its gains last week while the equity markets remain volatile ahead of the US Jobs report due Friday and today’s PCE data.

US GDP Beats Expectations

The final second quarter GDP figure in the US was revised higher to 3.90%, from 3.70%, surprising the markets. Median estimates expected to see the final number remain unchanged at 3.70%. The upward revision in GDP came with increased construction spending and consumer spending in areas of healthcare and transportation. The GDP print of 3.90% is the strongest quarterly gain so far this year and is in-line with the longer-term trend where the US economy is known to decline in the first quarter only to post strong gains by the second quarter. However, second quarter GDP was lower compared to the 4.6% recorded in second quarter of 2014. The US Dollar managed to close Friday's session with modest gains. The USDJPY currency pair closed the Friday session at 120.56 after testing a 10-day high at 121.23.

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Pro Independence Catalonians Prevail

Regional elections in Spain held over the weekend saw the pro-Independence parties for Spain's Catalonia region winning a clear majority, staking claim to over 72 seats in the 135 regional parliaments. The regional elections in Spain are important as the pro-Independence parties plan to delcare Catalonian independence from Spain within 18-months of coming of power. The EURUSD currency pair has opened today at 1.1188 and looks set for another bearish session while developments from Spain is likely to keep the markets a bit volatile in the near-term. It is uncertain at this point as to how the developments from Spain will affect the European markets but in Spain it could prove disastrous as one of the most prosperous regions decides to leave the greater nation. Data from Europe today is nonexistent and any news flash from Spain could swing the single currency in either direction.

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Crude Oil Stays Flat

WTI crude oil futures for November delivery posted another flat week settling at $45.32 per barrel. Oil prices remain largely range bound after prices dipped to a 6-year low of $38 last month. Prices in WTI attempted to rally on Friday but failed to close near the session highs of $46.33 despite the Baker Hughes Oil Rig Count posting 4-straight weekly declines. Gold futures managed to post modest gains for the week, rising 0.63% to close Friday at $1145.5 pre troy ounce. Gold prices look to be consolidating on the longer-term timeframes and has traded most of September within the range highs of $1174.98 and lows of $1071.28 posted back in July. The second consecutive month of sideways trading is pointing to a potential gold breakout in the coming months with prices finely balanced for momentum in either of the directions.

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Core PCE Ahead

The markets will be carefully monitoring devleopments in the monthly Personal Consumption Expenditure data due today from the United States. The median consensus estimates point to soft growth of 0.10% on the headline and 1.30% increase in the core figure on an annualized basis. With US unemployment being firmly cemented close to the Federal Reserve’s maximum employment target, inflation remains the sole point of concern. A possible beat of estimates is likely to keep the US Dollar well supported. Following the PCE data, US pending home sales numbers are also set to be announced. S&P500 futures closed last week on a bearish note after a strong shooting star pattern was formed previously. It is likely that the equity markets could come under pressure this week ahead of the monthly jobs report due later in the week.

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