Dollar Falls Ahead of GDP, Consumer Confidence Data
The US dollar was lower against its major trading partners early Wednesday, except for a further increase against the yen, ahead of the third release of Q3 GDP, the November existing home sales data and December consumer confidence.
Markets were reassured by US President Joseph Biden’s speech Tuesday that those that are vaccinated against COVID-19 can spend the holidays safely with other vaccinated people and that, more importantly, he is not calling for further mitigation measures.
Wednesday’s busy data schedule will be followed by the release of personal income and spending, initial jobless claims, and new home sales releases on Thursday before Friday’s holiday and the usual lull between Christmas and New Year’s Day next week.
A quick summary of foreign exchange action heading into Wednesday shows that USD-CAD fell to 1.2905 from 1.2914 at the Tuesday US close and 1.2932 a day ago before the strong Canadian retail sales data.
Both the Fed and the Bank of Canada are on track for rate increases in 2022, with the BOC likely to win the race, a positive for the Canadian dollar and a negative for the pair. Canadian manufacturing sales data will be released at 8:30 am ET.
USD-JPY rose to 114.2323 from 114.0933 at the Tuesday US close and 113.6920, continuing the upward trend. The yield differential between the US and Japan will continue to support the dollar, particularly after the FOMC moves through its accelerated tightening and begins to consider interest rate increases.
The minutes of October’s Bank of Japan meeting released overnight showed that the BOJ intends to keep rates steady for some time, but the BOJ did decide at last week’s meeting to trim asset purchases starting in April. There are no Japanese economic data scheduled for Wednesday.
EUR-USD rose to 1.1302 from 1.1285 at the Tuesday US close and 1.1284 a day ago despite a decline in EU consumer confidence in December released on Tuesday.
The European Central Bank said last week that it expects to hold interest rates steady until 2023 due to the spread of COVID, particularly the omicron variant.
GBP-USD rose to 1.3315 from 1.3269 at the Tuesday US close and from 1.3245 a day ago. UK GDP data released earlier on Tuesday showed a small downward revision to Q3 GDP, putting it further below the Q2 rate.
Rising COVID cases, particularly from the omicron variant, will weigh on Q4 UK growth and into the New Year. # Dollar Falls Ahead of GDP, Consumer Confidence Data
Read Also: U.S Dollar Holding Firm Ahead of Heavy Data Schedule
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