27/10/2023 

US dollar update

USD dollar Summary

The US Bureau of Economic Analysis reported earlier today that in September, the annual inflation rate in the United States, as measured by the change in the Personal Consumption Expenditures Price index, stood at 3.4%. The yearly Core PCE Price Index increased by 3.7%. This represented a slightly slower pace than the 3.8% rise observed in August. Monthly, the PCE Price Index increased by 0.4% and the Core PCE Price Index increased by 0.3%. Finally, personal spending saw a 0.7% increase monthly in September, while personal income rose by 0.3%.  The above results have negatively affected the US dollar as the USD Index dropped to 106.45, almost 0.1% compared to the daily highest price it performed earlier today. So far, the day is still profitable for the dollar.

Yesterday, there was important news for the US economy as well. The gross domestic product surged at an annual rate of 4.9% during the third quarter of 2023. This growth rate is the highest since the final quarter of 2021 and surpasses market expectations of 4.3%, as well as the prior report of a 2.1% expansion in the second quarter. In September 2023, there was a notable 4.7% month-over-month increase in new orders for durable goods in the United States. This marked a strong recovery from the 0.1% decline seen in August and greatly exceeded the anticipated 1.7% rise, making it the most substantial surge in three years.

Despite numerous challenges, the US economy has consistently defied the negative expectations and demonstrated resilience. Many analysts believe that the Federal Reserve is navigating uncharted territory, with policymakers openly acknowledging that these are unprecedented circumstances but so far, the results of the economy are impressive.

Market Views & Opinions

Scotiabank in today’s report mentions that “Neutral/bullish—Modest gains from support in the low 1.05 area yesterday give the short-term chart a slightly positive tinge but more gains are needed today to give a bit more confidence that the rebound can extend. At this point, the best we can say from a technical point of view is that the EUR sell-off has stalled. Support is 1.0520. Resistance is 1.0570/80.”

Commerzbank published an economic research today and the key points regarding the Fed are:

• At next week’s meeting, the Fed is likely to leave the target range for the fed funds at 5.25%-5.50%. Only if the recent very high pace of growth does not weaken is a further rate hike to be expected – but not before December at the earliest.
• The Fed still sees itself on course to gradually push inflation toward the 2% target. However, the strong growth of the U.S. economy until recently is a challenge for the Fed here.
• Fed Chairman Powell pointed out in a recent speech that economic history suggests that a sustained return to the inflation target will likely require a period of weaker growth and further cooling in the labor market.

IMPORTANT DISCLAIMER

The information in this report is of a general nature only. It is not a piece of personal financial advice. It does not take into account your objectives, financial situation, and personal needs.

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