US Dollar remains strong following more impressive data

Enrique Díaz-Álvarez27/May/2015Currency Updates


Sterling continued to fall on the Dollar as markets opened for the week in the UK on Tuesday, with the UK currency ending 0.1% lower.

On Tuesday morning the Confederation of British Industry released a strong survey on the state of the UK economy. The employers’ organisation claimed growth in retail sales were “bounding ahead”, following accelerated growth in the year to May. Sixty percent of those firms surveyed suggested that sales volumes were higher from a year previous, while only nine percent were lower. Low inflation, which is currently hovering around static, is giving households a much needed boost in spending power. The report suggests that robust consumer spending will boost economic growth in the UK to around 0.7% quarter on quarter, much higher than the 0.3% recorded in the first three months of 2015.

Today will be an unusually quiet day in terms of economic indicator data in the world economies. Attention will instead focus on a speech by the Queen at the State Opening of Parliament at 11.30am. The speech will outline the legislation that the newly elected Conservative Government aims to bring over the next year in the UK.


Downward pressure on the single currency continued on Tuesday, with the Euro ending the London session 0.1% lower on the Dollar.

There were no major data releases in the Eurozone on Tuesday. Attention among traders instead turned to Greece, as uncertainty over the country’s future in the Eurozone continues to weigh on the single currency. A Eurozone official claimed that a deal with the country’s creditors would not be reached by Thursday as both parties were still too far apart in negotiations. The Greek government has until 5th June to strike a deal or risk defaulting when a 305 million Euros loan repayment is due to the IMF. However, officials yesterday claimed that this could be avoided should all June IMF bills be lumped together and paid at the end of the month.

Few releases or announcements on the immediate horizon means the political bank and forth on Greece will dominate news in the Eurozone today.


The US Dollar continued its bullish trend on Tuesday, rising by 0.15% against its major peers, driven by the increasing anticipation that the Federal Reserve will hike rates in 2015.

Yesterday’s strong Dollar rally was fuelled by a better than expected durable goods report. Durable goods orders, excluding transportation, increased more than expected to 0.5% in the month of April, after orders for capital equipment rose for the second straight month. The headline measure was in line with expectations at -0.5%.

There was a string of other second-tier data releases, most of which surprised on the upside. Sales of new single-family homes yielded more impressive housing data, increasing above forecasts by 6.8%, to a seasonally adjusted annual rate of 517,000 units in April. Housing continues to be buoyed by a stronger job market, encouraging first time buyers to get on the property ladder. A stronger job situation also contributed to improved consumer confidence, which rose in May according to the Conference Board, up to 95.4 from a revised 94.3. Elsewhere, Markit’s composite PMI impressed, despite falling on last month, while the Case-Shiller Home Price index remained at 5%.

Today we’ll see a handful of smaller announcements across the pond, likely to cause no more than moderate Dollar volatility. The main market mover this week looks set to come on Friday, with the announcement of revised growth figures for quarter 1.

Rest of the world

The International Monetary Fund claimed on Tuesday that the Chinese Yuan was no longer undervalued following recent gains. However, the government would need to quicken reforms regarding China’s “still-too-strong external position” in order to achieve an effective floating exchange rate within the next two to three years.


Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.