Home Forex Dollar set to decline for a second straight week

Dollar set to decline for a second straight week

by Jonathan Adams
dollar

With most of the strong data and positive vaccine news now priced in, the greenback will struggle to make gains in the short-term

The dollar looks set to post a second-straight weekly decline Friday, shrugging off a wave of positive data earlier this week, and will continue to do so as most of the good news has already been priced in, Commerzbank said.

The U.S. dollar index, which measures the greenback against a basket of six major currencies, fell by 0.01% to 91.55.

Data earlier this week including retail sales and initial jobless claims surprised to the upside, but that drew little support to the dollar. The humdrum reaction suggests the positive effect of Biden’s economic stimulus package and good vaccination progress in the US is largely priced in, Commerzbank said. Strong U.S. data can no longer support the U.S. dollar.

With most of the strong data and positive vaccine news now priced in, the greenback will struggle to make gains in the short-term.

The immediate horizon, meanwhile, doesn’t offer up much reason for optimism for dollar bulls. Help from the Federal Reserve is still way off as Chairman Jerome Powell said the central bank was “highly unlikely” to raise rates before 2022.

We’ve said we expect to keep rates where they are until meet three-part test, Powell said Wednesday at a virtual event organized by the Economic Club of Washington. The three part test includes maximum employment, inflation reaching 2%, and on track to run moderately above 2% for some time.

Biden’s new infrastructure plan, aimed at long-term economic momentum, however, could provide the ammo needed for the dollar to rediscover its form, but progress on the legislative measure is unlikely until the summer.

The infrastructure plan is contentious, and if it were to pass Congress, would only become more concrete in the summer, for now, the plans are too abstract to support the dollar on a sustainable basis, Commerzbank added.



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