The US Dollar (USD) strengthened broadly against the majority of its most traded peers including the Pound (GBP) and Euro (EUR) on Tuesday after data showed that US consumer confidence soared to its highest level in seven years.
The USD/GBP exchange rate advanced to 0.590 close to a two week high and the USD/EUR Exchange rate advanced to 0.745, the highest level seen since November 2013.
According to the Conference Board its index of US Consumer confidence climbed to 90.0 in July, up from the 86.4 recorded in June and beat economist forecasts for a figure of 85.4.
The report also showed that the present situation index rose from 86.3 to 88.3 and the expectations index increased from June’s reading of 86.4 to 92.7 in July.
The unexpectedly sharp increase now means that consumer confidence is at its best level since October 2007 and will underline optimism over the strength of the world’s largest economy.
‘Stronger job growth helped boost consumer’s assessment of current conditions, while brighter short-term outlooks for the economy and jobs, and to a lesser extent personal income, drove the gain in expectations.
The figures suggest the recent strengthening in growth is likely to continue into the second half of the year,’ said the director of economic indicators at the Conference Board.
Taking some of the positivity out of the confidence data was a separate report which showed that house prices in the USA rose at the slowest pace in more than a year in the 12 months ending in May.
US Dollar Exchange Rate Forecast
The ‘Greenback’ is forecast to make further gains against its major rivals this week as expectations for positive data releases are high.
‘We’re expecting the US Dollar to gain momentum as there is plenty to keep the market focused on the Dollar. The market will be looking for confirmation that there’s a rebound in the US economy, especially the employment data,’ said Ian Stannard, the head of European foreign exchange strategy at Morgan Stanley in a telephone interview with Bloomberg.
Wednesday sees the publication of preliminary GDP data for the US as well as the Federal Reserve’s interest rate decision.
The GDP reports are expected to show that the US economy rebounded strongly in the second quarter and the Federal Reserve will be watched for any signs that it could be edging closer to raising interest rates.
The latest ADP employment change report is also due for release.
If that comes in strongly then investors are likely to increase their bets for a rate hike as earlier in the month Federal Reserve Chair Janet Yellen said that rates could rise if the labour market continues to improve.
US Dollar (USD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
US Dollar,
,Pound Sterling,0.5904 ,
US Dollar,,Euro,0.7455 ,
US Dollar,,Canadian Dollar,1.0821 ,
US Dollar,,Australian Dollar,1.0662 ,
Pound Sterling,,US Dollar,1.6939 ,
Euro,,US Dollar,1.3413 ,
[/table]
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