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The greenback re-approached a seven-month high as it rallied against its rival currencies before the weekend. Attributing to the US dollar’s upsurge were investor anticipation on a speech by Federal Reserve Chairwoman Janet Yellen and upbeat US key data.

Even before Friday’s anticipation on Yellen’s speech and US retail sales data supported the dollar, this week’s events had stacked to keep the currency supported: Fed’s minutes of the meeting and trade data.

·         The dollar was buoyed following the Wednesday release of the minutes of the September Fed policy meeting, revealing that many of the voting members of the committee claimed an interest rate increase would be granted “relatively soon”, provided the world’s largest economy—which is  that of the US—would continue to improve.

·         On Thursday, a positive report on trade data eased worries over global economic growth. The aforesaid data report showed that China’s trade surplus was reduced to $41.99 billion in September from August’s $52.05 billion. This greatly surpassed analysts’ forecast for trade surplus to expand to $53.00 billion.

Friday further pushed the dollar higher and cemented the odds for a rate hike as US retail sales data showed optimism. Data revealed that retail sales surged 0.6% in September, in line with forecasts and after a revised 0.2% dip the previous month.

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Core retail sales, excluding automobiles, rose by 0.5% in September and surpassed expectations for a lower 0.4% gain.

US producer price index (PPI) meanwhile, in a separate report, increased 0.3% in the prior month, higher than the expected gain of 0.2%. Core PPI, which excludes food and energy, edged up 0.2% last month, which topped economists’ projections for a 0.1% rise.

With these positive news stories lingering in the market, the greenback hit an intraday high of 97.96 today on the US Dollar Index, merely a few points lower from Thursday’s seven-month peak of 98.12. The dollar is set for weekly gains as it ticked up with Treasure yields.

As of writing, the dollar is ticking up by 0.36%, perched at 97.88 and consolidated by the recently released retail sales data report. On the given daily chart of the US Dollar Index, the currency has been on a solid and steady rally since the Bollinger bands breakout on October 3. This was largely attributed to a robust report on US manufacturing data. In the ten trading sessions beginning October 3, strong US data reports were what kept the dollar supported that ultimately helped it touch a seven-month high.

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We are expecting that the bulls will be largely in control of the dollar, and this momentum will likely extend until next week. The positive data influences market sentiment fundamentally, as seen on the streak of rallies beginning October 3. Yellen’s speech is still widely anticipated, but if it presents a dovish view on US interest rate hikes, the upbeat retail sales data is likely to offset the Fed’s outlook.

However, given the optimism brought by Friday’s report, the Fed may brighten up their rate hike outlook more.

 

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