As market participants take a deep breath and reflect on last Friday’s significant economic data releases, the result is a foreign exchange landscape that is beginning the week with some cautious chop. The greenback is giving back some of its gains from last week, but still holding relatively firm against the majors given the positive momentum the dollar index carried into the weekend. The big dollar took a bit of a hit during early European trade when a French official was quoted saying President Obama told the G7 summit that the strong American dollar was a problem; however, the White House was quick to deny the statement, which in turn, helped stem any further losses in the DXY. Looking past the market’s headline-influenced gyrations, the broader underlying theme to the market is one that supports the greenback, with Friday’s employment report likely giving the Federal Reserve confidence that a rate hike in the latter half of 2015 will be justified. We would expect that the unfolding rebound in second quarter growth, coupled with the continued improvement in the labour market, will help the DXY endure with its recovery after the corrective period experienced from March to May. The economic calendar is relatively light for the USD during the week, though retail sales on Thursday will be a major focus for traders given the softness experienced in this data set for the month of April. The disappointing April print that suggested the rough ride for consumer demand didn’t vanish after the conclusion of the first quarter has been a thorn in side for the DXY bulls, though expectations are to see a sharp rebound in spending for May after incomes, consumer confidence, and jobs all have been on the rise throughout the second quarter.
Turning our attention eastward, there were a few notable developments released Sunday night in Asia. The Japanese yen is managing to make some small strides against the greenback after final Q1 GDP growth numbers were revised higher to an annualized reading of 3.9%. Originally reported at a growth rate of 2.4%, positive revisions to capital expenditures helped propel the final GDP reading higher, and pushing expectations out further of when, or if, the Bank of Japan will expand their current asset purchase program. The Nikkei finished its session essentially unchanged, while USDJPY has come off the highs registered on Friday in the wake of the better than expected Non-Farm Payroll report out of the US.
Read the rest of the article USD remains firm