USDX Dollar Index recap for 19;20.10.2015
U.S. Dollar started the week a bit negative, then pulled back up finding support from 94.46 as a new buy zone. As dollar is gaining strength for now after worse Building Permits coming in negative at 1.10M against 1.16M, but positive Housing Starts coming at 1.21M against 1.14M we had some comments from FOMC Member Dudley who made some claims:
- Decision October FOMC will be taken at meeting
- Will need accommodative policy for a few years
- Fed policy will be accommodative after liftoff.
- Declines to say how he will vote at October FOMC
- Growth is still around 2%, according to his forecasts
- Healthy sign pace of growth slowing a bit
- Says he expects jobless rate to go below 5%
- US economy is still on a good trajectory
- Takes about a year or two for policy actions to impact
- Trying to look through month on month swings for a general trend
- Expects further job gains
- Some of the slowdown in jobs is due to a stronger dollar
- Sees 2nd half growth at 2% annual rate
- Inflation will return to 2% of the next couple years
- Sees 2 to 2.25% GDP growth in 2016
- Zero interest rates likely not needed in near future
- US will be running high pressure economy next 2 years; will bring people into labor market
- Yellen has enormous respect for her Fed leadership
- Sees strong arguments on both sides on fed liftoff
- Fed has tried hard to be more transparent
- US faces significant headwinds from abroad
- Energy prices holding down overall inflation; underlying inflation not nearly as low
- Natural rate of interest rates likely to be lower
- Argues for gradual pave of removing accomodation
- Prefers to go a bit earlier, then go gradually.
- Fed can lower rates after liftoff if needed.
Inflationary comment and the note about the good economic trajectory and putting the rate still on the table until the meeting this month where all be made clear, boosted overall usd strength across the board. The Index broke the trend line on the daily on the 10.09.2015 and the move knee jerked to 93.80 as a vital support level. Still the macro picture of the Index is showing a choppy range, which is normal with the Fed rate hike limbo situation. We may say in the short-term move towards 95.97 - the average level of the Index. This will be a return inside the broken trend line before and if condition remain and future events continue to boost USD strength we may see the Index forming a new up trend and moving to 96.81 as well. Though still the Index is in a range, there will be strong pressure on the top side for sure, so watch out for that in the near future.