US Dollar May See Breaks vs. the Majors Amid Growth Reports, Fed Decision

Forex traders found that most of the major currencies were restricted to ranges last week, but with a flurry of US growth indicators due to be released and a rate decision by the Federal Reserve expected to be announced, increased US dollar volatility could ignite some breakouts.

[ul]
[li][B]US NAR Existing Home Sales (MAY) – June 23[/B][/li] On Tuesday, the National Association of Realtors (NAR) is anticipated to report that existing home sales rose for the second straight month at a rate of 2.6 percent in May to an annual pace of 4.80 million from 4.68 million. While not always a reliable leading indicator, there are encouraging signs that existing home sales could improve in line with expectations, as the Commerce Department reported on June 16 that housing starts jumped for the first time in three months by 17.2 percent in May to an annual rate of 532K from a record low of 454K. Likewise, building permits rose by 4.0 percent during the month to an annual rate of 518K from a record low of 498K.
[li][B]US Durable Goods Orders (MAY) – June 24[/B][/li] The upcoming release of US durable goods orders are projected to show a 0.8 percent decline in May following a 1.9 percent jump in April, and excluding transportation the index is forecasted to fall 0.5 percent. While the headline result will have the most impact on forex trading, the markets should keep an eye on non-defense capital goods orders excluding aircraft, as this number serves as a leading indicator for business investment. This component has remained negative over the past two months, and a continuation of this dynamic would not be supportive of outlooks for a slow recovery in the US economy.
[li][B]Federal Open Market Committee (FOMC) Rate Decision – June 24[/B][/li] At 14:15 ET, the Federal Open Market Committee (FOMC) is widely expected to leave the fed funds target range at 0.0 percent - 0.25 percent, and this should remain the case throughout much of the year. In fact, the FOMC started saying in January that they continue “to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time,” and they went on to say something similar in March and April. Furthermore, the last statement highlighted that the Committee’s policy focus is to support the functioning of financial markets via quantitative easing (QE) and other measures that are likely to keep the size of the Federal Reserve’s balance sheet at a high level. As long as we see these sorts of statements continue to be published, the news shouldn’t be too market-moving. However, the statement could send the US dollar spiraling lower if the FOMC announces an expansion of their QU efforts, and ultimately, any news that is positive for the stock markets may be negative for the greenback, which has been trading, at times, as a safe-haven asset, and vice versa.
[li][B]US GDP (QoQ) (Annualized) (1Q F) – June 25[/B][/li] The third and final round of US Q1 GDP estimates are due to hit the wires, and the results could be market-moving if they miss expectations. At the time of writing, a Bloomberg News poll of economists reflected consensus forecasts for GDP is forecasted to go unrevised at -5.7 percent, which marks an improvement when compared to the Q4 2008 result of -6.3 percent. However, if Q1 GDP is revised higher, the news would likely provide a huge boost to risk appetite as it make the US economy appear to be in a better position to stage a recovery later in the year. On the other hand, downward revisions would have the potential to take FX carry trades and equities lower.
[li][B]New Zealand GDP (QoQ) (1Q) – June 25[/B][/li] Upcoming GDP reports are anticipated to show that the New Zealand economy contracted for the fifth straight quarter during Q1 at a rate of -0.7 percent, which could push the year-over-year rate down to match the Q4 1991 low of -2.3 percent. Indeed, the New Zealand economy has been hit hard as demand for exports has fallen, unemployment has climbed, and consumer spending has faltered. As it stand, Credit Suisse overnight index swaps are pricing in a 26 percent chance of a 25bp cut by the Reserve Bank of New Zealand (RBNZ) on July 29, but if New Zealand GDP falls more than expected, speculation of such a move could rise and weigh on the New Zealand dollar.
[/ul] [B]
See the DailyFX Calendar for afull list, timetable, and consensus forecasts for upcoming economic indicators.
Send questions or comments to <[email protected]>[/B]