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US Dollar Soars as Fed QE Cutback Speculation Resurfaces

US Dollar Soars as Fed QE Cutback Speculation Resurfaces

Ilya Spivak, Head Strategist, APAC

The US Dollar rallied as markets positioned for the possibility that this week’s headline economic data will bolster the case for a cutback in the Fed’s QE efforts.

Talking Points

  • US Dollar Soars as Markets Position for “Taper On” News-flow Ahead
  • Yen Spikes Higher on GDP Miss, Promptly Reverses on Fed Speculation

The US Dollar is outperforming to start the trading week, rising as much as 0.4 percent on average against its leading counterparts. The move is tracking a drop in S&P 500 futures, hinting price action may reflect pre-positioning ahead of this week’s key US economic reports and their implications for the Fed’s decision to “taper” QE asset purchases at the September policy meeting.

News-flow out of the world’s top economy has continued to improve over recent weeks, with figures from Citigroup suggesting economic data outcomes are broadly outperforming expectations by the largest margin since December of last year. This opens the door for upside surprises as Retail Sales, CPI and UofM Consumer Confidence numbers cross the wires this week, which traders fear may reinforce the likelihood of a cutback in stimulus just around the corner.

Not surprisingly, this has translated into USD strength for amid waning dilution fears as well as a shift toward a more supportive yields profile in as the US central bank begins to scale back the downward pressure it is exerting on borrowing costs. The Australian Dollar and the Japanese Yen bore the brunt of the greenback’s advance, sliding as much as 0.7 percent each. The latter currency briefly rallied after a disappointing set of second-quarter GDP figures but the move proved short-lived.

New to FX? Watch this Video. For live market updates, visit the Real Time News Feed

Asia Session:

GMT

CCY

EVENT

ACT

EXP

PREV

21:17

NZD

REINZ Housing Price Index (JUL)

3669.1

-

3685.8

21:17

NZD

REINZ House Price Index (MoM) (JUL)

-0.5%

-

0.0%

21:17

NZD

REINZ House Sales (YoY) (JUL)

14.7%

-

0.0%

22:45

NZD

Food Prices (MoM) (JUL)

0.5%

-

2.1%

23:50

JPY

GDP (QoQ) (2Q P)

0.6%

0.9%

0.9%

23:50

JPY

GDP Annualized (2Q P)

2.6%

3.6%

3.8%

23:50

JPY

Nominal GDP (QoQ) (2Q P)

0.7%

1.0%

0.6%

23:50

JPY

GDP Deflator (YoY) (2Q P)

-0.3%

-0.7%

-1.1%

23:50

JPY

GDP Consumer Spending (YoY) (2Q P)

0.8%

-

0.9%

23:50

JPY

GDP Business Spending (YoY) (2Q P)

-0.1%

0.6%

-0.3%

23:50

JPY

Domestic CGPI (MoM) (JUL)

0.5%

0.2%

0.1%

23:50

JPY

Domestic CGPI (YoY) (JUL)

2.2%

1.9%

1.2%

1:30

AUD

Credit Card Purchases (A$) (JUN)

20.3B

-

22.6B

1:30

AUD

Credit Card Balances (A$) (JUN)

49.9B

-

49.6B

4:00

JPY

Tokyo Condominium Sales (YoY) (JUL)

31.6%

-

22.0%

4:30

JPY

Industrial Production (MoM) (JUN F)

-3.1%

-

-3.30%

4:30

JPY

Industrial Production (YoY) (JUN F)

-4.6%

-

-4.8%

4:30

JPY

Capacity Utilization (MoM) (JUN F)

-2.3%

-

2.3%

6:00

JPY

Machine Tool Orders (JUL P)

-12.1%

-

-12.4%

Euro Session:

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

7:15

CHF

Retail Sales (Real) (YoY) (JUN)

2.3% (A)

1.5%

Medium

Critical Levels:

CCY

SUPP 3

SUPP 2

SUPP 1

Pivot Point

RES 1

RES 2

RES 3

EURUSD

1.3239

1.3297

1.332

1.3355

1.3378

1.3413

1.3471

GBPUSD

1.5394

1.5456

1.5477

1.5518

1.5539

1.558

1.5642

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, please CLICK HERE

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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