Dollar Clings on in Forex Markets as Yields Drop

James Randall

forex graphThe US dollar managed to preserve a strong performance in the forex markets over Tuesday and into Wednesday.

The currency headed off a threat from US bond yields hitting a 19-month low to preserve its position, riding high on the back of political worries elsewhere in the world.

It benefitted from ongoing political instability in countries like Britain, where the Conservative Party is looking to elect a new leader in the face of Theresa May’s resignation.

The dollar was also boosted yesterday by reports that the single European currency was at risk over the Italian debt crisis, which threatens to see the major economy fined for exceeding pre-agreed debt limits.

Overall, the dollar index which assesses the greenback’s performance against several other major currencies rose to 97.815 by the afternoon – representing a hike of 0.082%.

The single European currency did manage to rise a little despite the worries over Italy and held firm at $1.1187.

The Japanese yen showed barely any change from its previous position of 109.57 per dollar in the JPY/USD pair.

However, problems may be on the horizon for all currencies after President Trump suggested that there was still little sign of a trade deal between the US and China making progress.

With the midweek point in the forex trading week now here, it’s time to look at what lies ahead for the rest of the week.

Today (Wednesday) there will be a number of data releases in the US, including a release on mortgage applications from the MBA for the dates around May 24th. These were last recorded at 2.4%.

The Richmond Federal Reserve’s manufacturing index for the month of May is due out at 2pm GMT and is expected to show a change from 3 to 6.

Foreign bond investment statistics for the dates around May 24th are due out of Japan at 11.50pm GMT.

Looking ahead to Thursday, there are market closures in place in a number of countries including Switzerland and Germany due to the Ascension Day holiday.

Elsewhere, the Bank of England’s David Ramsden, who is Deputy Governor for Markets and Banking at the Bank, will speak at 7.30am GMT.

Preliminary annualised gross domestic product data for the first quarter of 2019 is due out of the US at 12.30pm GMT. It is predicted to show a change from 3.2% to 3.1%.

Preliminary core personal consumption expenditures data for the first quarter of 2019 is also due out of the US at the same time. This is expected to show no change from its previous position of 0.6%.

Pending home sales data for April is due out of the US at 2pm GMT. This is expected to show a month on month change from 3.8% to 0.9%.

There’ll be two central banker speeches from the US Federal Reserve to look out for over the course of Thursday too. Richard H. Clarida, who is Vice Chairman of the Board of Governors of the Federal Reserve System, will speak at 4pm GMT. While Carolyn A. Wilkins, Senior Deputy Governor of the Bank of Canada, will speak at 6.15pm GMT.

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James Randall
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