US Dollar May Extend Gains vs Euro if Sentiment Data Sours

US SENTIMENT DATA, RECESSION FEARS, US DOLLAR – TALKING POINTS

  • US Dollar may rise on U. of Mich. Sentiment data and housing reports
  • Economic data docket in the US remains relatively sparse
  • Markets may experience cautious risk aversion as investors prepare for next week

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The economic data docket in the US remains relatively sparse, though University of Michigan sentiment reports may spark volatility and push the Greenback higher if it exacerbates growing recession fears. Data out of the US has been tending to miss underperform relative to analysts’ estimates so it would not be shocking to see these reports fall in line with the broader trend.

A number of housing indicators will also be published which may either amplify risk aversion or slightly mitigate the effect of unsavory sentiment data. Not only does housing construction provide jobs but it also sets the stage for a longer-term upward inflationary impact. When consumers purchase a home, they have to furnish it. This spending pattern iterated across hundreds of thousands of households create can push up price growth.

Given the heavy economic data docket next week and the number of high-profile events – Fed meeting minutes and the Jackson Hole symposium – traders may wait to add exposure until next week. Furthermore, other fundamental themes such as escalating US-China trade tensions (and now possibly with the EU) may occur over the weekend and cause gaps when markets open next week. Investors may therefore not want to hold any positions over the weekend.

CHART OF THE DAY: US DOLLAR INDEX CONTINUES TO CLIMB ABOVE RISING SUPPORT

Chart Showing US Dollar Index

US Dollar Index chart created using TradingView

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— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter