Increased consumer spending supported Dollar | IFCM
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Increased consumer spending supported Dollar - 24.12.2013

On Monday, the U.S. dollar strengthened slightly due to optimistic macroeconomic data. Growth in consumer spending in the USA in November was the highest in the last five months. This indicator has beeb increasing for seven consecutive months. Investors believe that this confirms the U.S. economic recovery. They also hope that the new season of Christmas sales will be very successfull for American companies. This period generates up to 30% of annual sales in some retail sectors. Let's note that the increase in consumer activity is yet not associated with inflation. Growth in consumer prices in the USA over the past 12 months was only 0.9%. Today at 13-30 GMT we are expecting November Core Durable Goods Orders from the United States. Preliminary forecasts are positive, which may support the dollar. At 15-00 GMT we'll see information on new home sales in November. Some decrease is expected, which may cause increased volatility in the currency markets.

Japanese yen (USDJPY) rose by 0.2%. It approached to the five-year maximum 104.64 yen per U.S. dollar, established on December 20, but could not overcome it. At 105 level there are many sell orders relating to option contracts. We believe that this situation can last at least until the options expire on December 26. We'd like to mention that the main reason of the yen weakening are the actions of the BoJ, which buys over 7 trillion yen of Japanese government bonds a month ($67.1 billion) by printing money. That is, BoJ does the same thing as the Fed does. The purpose of this operation of the Bank is the completion of a 15-year deflation period and the achievement of 2% inflation rate. This should contribute to economic growth.

USDJPY, H4

USDCAD, H4

Canadian Dollar (USDCAD) slightly strengthened thanks to the data showing increased GDP in Canada in October. GDP has been growing for the fourth consecutive month. Also, an increase was observed in wholesale trade and industry. Meanwhile, according to the Commission Commodity Futures Trading, net short in the Canadian dollar against the U.S. dollar is growing rapidly and last week reached their highest level during seven months. More about this you can read in the "Market sentiment" (You can always keep track of it by getting the Widget Market Sentiment). While it is difficult to say whether the speculators will be able to significantly weaken the Canadian dollar. This year it fell by 3.5% against nine major currencies and the U.S. dollar index (USDIDX) increased by 3.9%. From January 6, 2014 we'll see significant economic data from Canada, which should clarify the situation.

The next release (GMT+0, Greenwich): 11:00
Questions and suggestions:analytics@ifcmarkets.com

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