USD Selloff Post-FOMC Minutes May Not Last Long
- See the May forex seasonality report.
The US Dollar is doing exactly what it should have done in the wake of the release of the April FOMC minutes: selloff. The minutes appeared dovish: after weeks of disappointing economic data culminating in the dismal +0.2% Q1'15 GDP reading, Fed officials have continued to advise a cautious tone on rate hikes.
What's now working for the US Dollar is that the recent bump in select data prints - mainly the April Nonfarm Payrolls report and yesterday's April Building Permits and Housing Starts - weren't reflected in the minutes. In a sense, the minutes reflected dated observations on the state of the economy.
Henceforth, the US Dollar has been essentially give slate of sentiment to work around, now that the Fed has seen its optimistic projections toned down. The figures released over recent days have truly surprised - the April Housing Starts figure was the best since November 2007 - and if the data continues to surprise, traders will be quick to embrace the view that the Fed is behind the 8-ball and will soon shift its tone more hawkish in the future.
Today's data releases could easily feed into this narrative. At 10:00 EDT/14:00 GMT, a slew of US economic data will be released that speaks directly to the state of affairs in sectors or industries that were underachievers in Q1'15: Leading Indicators for April; Existing Home Sales for April; and the Philadelphia Fed Index for May. All of today's data and estimates are available on the DailyFX Economic Calendar for Thursday, May 21, 2015.
See the above video for technical considerations in EURUSD, GBPUSD, USDJPY, USDCAD, and the USDOLLAR Index.
--- Written by Christopher Vecchio, Currency Strategist
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