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The US Dollar Index closed over 103.15, marking its highest daily close in almost a month. It did, however, finish well below the intraday high, indicating that it may consolidate over the coming hours.
US Treasury yields continue to provide a significant support for the dollar. Both the 10-year yield and the 2-year yield increased to their highest levels in a month, rising to 4.20% and 4.97%, respectively. Despite expectations that the Federal Reserve will maintain its current policy at the upcoming FOMC meeting, the upward trend in rates is still strong.
The week began on Wall Street in the green territory. The Nasdaq increased by 1.05% and the Dow Jones gained 0.07%. Investors expressed hope for a smooth economic landing.
During the US trading session, the EUR/USD managed to move over 1.0900 after dropping once more and below important moving averages. In comparison to the Pound and the Swiss Franc, the Euro also declined. On Tuesday, the ZEW Survey is due.
Economic Data
On early Tuesday, during the Asian session, Japanese economic growth came in as 1.5% QoQ versus 0.8% expected and 0.7% prior, per the preliminary readings of the second quarter (Q2) 2023 Gross Domestic Product (GDP) figures. The Annualized GDP rose to 6.0% versus 3.1% expected and 2.7% prior. Further, GDP Deflator came in as 3.4% YoY, versus expectations of being unchanged at 2.0%.
The Federal Reserve Bank of New York’s monthly Survey of Consumer Expectations showed on Monday that the US consumers’ one-year inflation expectation dropped to the lowest level since April 2021 at 3.5% in July from 3.8% in June.
Forex Updates
GBP/USD finished flat after recovering during the American session. The pair bottomed at 1.2616, matching the 100-day Simple Moving Average (SMA), and rebounded toward 1.2700. The UK will report employment data for the three months ended in June. On Wednesday, more data is due with the inflation report.
USD/JPY rose for the sixth consecutive day and posted the highest daily close since November, near 145.50. USD/CHF finished higher but below 0.8800. The pair peaked at 0.8831, the highest intraday level in a month, and then pulled back. The Swiss Producer and Import Price Index is due on Tuesday.
USD/CAD continues to move with an upward bias, holding firm above 1.3400. Inflation data is due from Canada on Tuesday. The Consumer Price Index (CPI) is expected to show a 0.3% monthly increase in July. Also due is the Manufacturing Sales report.
AUD/USD retreated for a sixth day in a row, but it ended off lows at 0.6450. The two surged back up to 0.6500 after finding support around 0.6450. Commodity price fell lower and a cautious mood on the financial markets have an impact on the currencies of the antipodes.
The minutes from the most recent meeting of the Reserve Bank of Australia, which kept the benchmark interest rate at 4.10%, will be made public. In addition, the Wage Price Index is due. NZD/USD traded below the 0.6000 mark, posting its weakest daily finish since mid-November. On Wednesday, the Reserve Bank of New Zealand will publish its decision on monetary policy.
Silver lost ground and ended at approximately $22.55, while Gold lost territory but maintained above $1,900.
What to watch on Tuesday:
Retail Sales data for the US will be released, and a gain of 0.4% is predicted for July. The NY Empire Manufacturing Index is also due.
Tuesday’s CPI report will provide the main risk event this week, where TD looks for inflation to firm 0.3pp to 3.1% as prices rise by 0.4% m/m. Manufacturing and wholesale sales will give new insight towards Q2 GDP tracking, while housing starts and existing home sales for July round out the domestic data calendar.
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