Is the Greenback’s ship finally coming in? (video)
Currencies Direct May 27th 2015 - 2 minute read
The US dollar has taken a significant battering over the past five weeks, but so far this week it looks to be getting back on track. There are a few reasons behind this rebound.
The dollar began to strengthen during European trading hours as concerns over slow progress in talks between Greece and its creditors continued to weigh on investors’ confidence. In an interview, European Commission President Jean-Claude Juncker confirmed that the commission would do everything possible to avoid capital controls in Greece. He also said that 5 June will be the “obvious deadline” to find a solution to the present impasse, as it’s when Greece’s next repayment to the International Monetary Fund is due.
Investor sentiment towards the Greenback markedly improved in the wake of Janet Yellen’s speech on Friday (22 May), in which she said that interest rates are likely to rise this year if US economic growth picks up in line with the US Federal Reserve’s expectations. This is a position that was also adopted by the Fed’s Vice-Chair Stanley Fischer, in a speech he delivered in Israel.
Monetary policy is not the only contributor to the dollar’s resurgence. The dollar was also supported by the macroeconomic data – durable goods are up 0.5% from March according to the Commerce Department. Consumer confidence was also slightly more upbeat this month, after a surprise decline in April.
The US housing market is showing signs of strong growth, too. New-home sales climbed 6.8% from March to a seasonally adjusted annual rate of 517,000, the Commerce Department said on Tuesday (26 May).
Although today will be fairly quiet data-wise, tomorrow (27 May) will be a big day for investors. This year’s three-day meeting of the G7’s finance ministers and central bank chiefs kicks off in Dresden – Greece will be at the centre of discussions, and investors will be eager to hear what’s said.