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U.S. Dollar Soars to Nearly Three-Week High as Chance of Rate Hike Rises

By:
James Hyerczyk
Updated: Aug 16, 2017, 07:30 UTC

U.S. Dollar Index futures soared to their highest level since July 25 on Tuesday after the release of better-than-expected U.S. economic data. The index

Interest Rate

U.S. Dollar Index futures soared to their highest level since July 25 on Tuesday after the release of better-than-expected U.S. economic data. The index was underpinned early in the session by the news that North Korean leader Kim Jong Un had delayed a decision on firing missiles toward the U.S. Pacific territory of Guam, but it was the economic data that sent the index to nearly a three-week high.

The U.S. Dollar rose by more than 1 percent against the Japanese Yen with the USD/JPY reaching its highest level in more than a week. The EUR/USD fell to its lowest level since July 28. Both the Euro and the Japanese Yen are the highest weighted currencies in the dollar index.

U.S. Dollar Index
Daily September U.S. Dollar Index

U.S. Economic Data

According to the U.S. Commerce Department, July retail sales posted their largest gain since December 2016, coming in a robust 0.6% higher. June’s figure was also upwardly revised to 0.3 percent. The government said the increase was related to consumer purchases of motor vehicles as well as discretionary spending.

In other news, the New York Fed’s Empire State manufacturing index surge 15 points to 25.2, its highest in nearly three years. Economists were looking for an unchanged reading of 9.8. Import prices came in as expected, up 0.1%, but higher than the previous -0.2%. Business Inventories were slightly worse than the estimate.

The National Association of Home Builders (NAHB) said Tuesday the Housing Market Index (HMI) gained 4 points to 68 in August, beating the median forecast. The index reached its high level seen earlier this year and represents strong building confidence among the nation’s home builders.

Gold
Daily December Comex Gold

Gold

Gold prices retreated for a second day on Tuesday, pressured by rising U.S. Treasury yields and increasing demand for higher risk assets. Yields rose in reaction to the robust U.S. economic news, which increased the chances of a Fed rate hike later this year. Higher yields made the dollar a more attractive investment, hurting demand for dollar-denominated gold.

Crude Oil
Daily October West Texas Intermediate Crude Oil

Crude Oil

U.S. West Texas Intermediate and internationally-favored Brent crude oil spent most of the session lower, but managed to eke out a higher close. The markets were weighed down and the upside limited because of the stronger U.S. Dollar and signs of weaker demand in China.

According to official data from China, oil refineries operated in July at their slowest daily rates since September. The steep drop came as a surprise to investors, raising concerns over the state of Chinese demand and level of domestic stockpiles.

The sharp rise in the U.S. Dollar also raised questions about future foreign demand for dollar-denominated crude oil.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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