The US dollar was driven lower throughout last week as increased risk appetite only worked to the benefit of high-yielding currencies, and by Friday, the US dollar index settled right above intraday trendline support, which connects the March and early April lows, at 84.20.
[B]
US Dollar Could Resume Uptrend on Safe-Haven Demand This Week[/B]
[B]Fundamental Outlook for US Dollar: Bullish[/B]
- ISM Manufacturing, pending home sales were better than expected
- G-20 meeting yielded few surprises, increased financial regulation
- US non-farm payrolls fell in line with expectations by 663,000, unemployment rate hits 25-year high of 8.5%
The US dollar was driven lower throughout last week as increased risk appetite only worked to the benefit of high-yielding currencies, and by Friday, the US dollar index settled right above intraday trendline support, which connects the March and early April lows, at 84.20. Where the greenback goes from here will depend, not surprisingly, on risk trends as fundamentals have yet to really matter again for the currency. Indeed, for the most part, US economic data has beaten expectations – with the exception of Friday’s NFP and ISM non-manufacturing figures – and yet the US dollar has continued to fall. As a result, it will be important to watch how US releases impact investor sentiment, and looking at the US economic calendar, Wednesday’s Federal Open Market Committee (FOMC) meeting minutes will likely be the big event to watch.
In March, the FOMC left the fed funds target range at 0.0 percent - 0.25 percent but the big surprise was that they officially announced quantitative easing efforts. Since this information has already been revealed, the release of the minutes may not be very market-moving, but they will likely add to indications that the FOMC will leave the target unchanged throughout much of 2009 and that they will continue to use the central bank’s balance sheet in an effort to improve credit conditions. The one thing that may capture the market’s attention is the FOMC’s long-run projections for growth, unemployment, and inflation as revisions that indicate that the outlook appears to be even worse than previously anticipated could hurt risk appetite throughout the financial markets, and thus lift safe-haven currencies like the US dollar. However, if the revisions go unchanged, traders may shrug-off this once critical release.