The US dollar is beaten this Friday. It loses ground everywhere. This happened before the disappointing GDP figure, and also after them. Bad Friday for the greenback, yet again. A long term fall in the dollar is imminent.
Economic Figures
At the beginning of the week, I wrote about 6 key events, in my post: Contraction or Retraction? Here’s a quick roundup of the events:
- CB Consumer Confidence: Big surprise – went up to 54.9, extremely better than early expectations at 42.7. Here’s an analysis of this event: Risk Appetite Rules.
- Existing Home Sales: Were slightly better than expected: 4.68 million instead of 4.65 million. American housing is off the bottom, but no big surprises.
- Durable Goods Orders: Big surprise – Rose by 1.9% instead of an expected 0.1% rise. Also the Core Durable Goods Orders was positive: rose 0.8% instead of falling by 0.4%.
- Unemployment Claims: At 623K – Slightly better than expected, but as aforementioned, the job market is the Achilles heel of the US economy.
- New Home Sales: At 352K, slightly worse than expected, but not dramatic.
- Prelim GDP: This figure disappointed, showing contraction of 5.7% instead of 5.5% in the early Advance GDP release.
- Something Unexpected: Yes there was such a thing this week! The North Korea crisis continues, with more missiles. This ignites fears, and risk aversion eases the fall of the dollar.
Forex Trading
The dollar lost ground to other currencies, especially on Friday: EUR/USD is above 1.41, GBP/USD above 1.61 and USD/CHF went under 1.07. Most moves occurred on Friday. They didn’t happen after the release of the GDP, so it’s an early Friday effect.
The reaction to the North Korean crisis was dollar buying. The reaction to good figures was dollar selling. This means that the risk factor is very very strong. Currently, risk appetite continues to beat risk aversion.
The US dollar didn’t manage to retrace its losses from last week. It continued to retreat on all fronts. This means that the dollar weakness is here to stay. It looks like the long-term trend is dollar negative.
Bottom lines:
- The first quarter was awful.
- There are some signs of recovery in the second quarter.
- Risk factor is very strong.
- The dollar is going down.
Have a great weekend!