What Moves The Dollar?

The dollar… what a currency, right? Is there a more international word than “dollar”? We’ve all heard of it, no matter if you are a financial expert, a doctor or a security guard. And the fascinating thing about it is that we all love dollars! Let’s see what moves it.

Today, our dear friend is moving higher across the board. The USDX, which gauges the greenback against a basket of six major rivals, was steady to trade at 97.28 as of 07:30 GMT.

The currency has been on the watch lately as the Federal Reserve met last week for a fresh monetary policy gathering. The US regulator, as expected, rose short term interest rates by 25 basis points, marking the second hike in the last six month.

Monetary normalization is a bullish factor for the greenback, which means it will make it stronger against other currencies, like the yen, the euro or the pound, just to name a few.

As the data front is looking thin this week, the US currency will be likely moving on remarks from FOMC speakers regarding the future plans of the regulator. Last week, Fed’s statement showed a clearly hawkish stance on monetary policy, saying a third hike is still pending later this year.

However, economic data is not supporting the case, which creates a certain degree of uncertainty that could weigh on the greenback. In that line, traders should keep an eye on incoming data the next few weeks and months.

Special attention should be placed at some key reports, including gross domestic product, retail sales, consumer price index, producer price index and of course, nonfarm payrolls. If these reports outperform analysts’ expectations, the dollar will rally as chances for a hike increase.

On the contrary, continuing downbeat data would be supportive for sellers. Bears are betting that the Fed will halt its normalization plan due to unsustainable economic conditions.

According to Fed funds tracked by the CME Group’s FedWatch program, market participants are currently weighing in around a 12.8 percent chance of a 25 basis point rate hike in September, while probability for December stands at nearly 40 percent.