Can we celebrate the 4th of July with some USD strength?
The US dollar is mixed on Independence Day. Most of yesterday’s USD/JPY gains were washed out but the euro has continued to drift lower.
I have been touting US dollar buying on an economic pickup but it’s getting more difficult to stay optimistic. It’s not because the data hasn’t been strong, it’s because the US dollar has hardly reacted to stronger data.
Consider this:
- CPI at the highest since Oct 2012
- Jobless claims near the lowest since the crisis
- Markit manufacturing PMI at highest since the survey started in 2007
- US vehicle sales at the highest since 2006
- Consumer confidence at the highest since 2008
- New home sales at the highest since 2008
- ADP employment highest since Nov 2011
- Unemployment rate at lowest since 2008
All those numbers were better than expected and released in the past month yet over that period the US dollar is almost the worst-performing currency (beating only the euro and by only 6 pips).
The anchor on the US dollar has been the first quarter GDP report. It’s shocking that growth fell 2.9% but at the same time we’re talking about something that happened more than 3 months ago. Still, at some point a dollar bull has to give up and recognize that price action is what matters. Blockbuster ADP and NFP data has been basically shrugged off and unless Yellen strolls out and starts talking about rate hikes, it’s tough for me to envision a positive catalyst for the US dollar.
