The USD Stalls for Fundamental Releases

• USD still in recovery


• GBPUSD share the same plight

The Dow Jones FXCM USD Index shows the USD opening the new month with a slump as it entered into a near-term support range that was triggered by Friday’s GDP release, the GDP caused the index to break another support level. Even if traders envision a recovery for the USD, the big picture actively holds the possibility that it will fall further down aiming for another major support.

In the days preceding the Q2 GDP report last Friday, a 65% possibility of a rate hike by June 2017 loomed, the Feds futures contract also implied the chances rising in January 2018 at the start of July. The Post-GDP slump in rate anticipations has shown to be one of the factors currently pulling on the USD. The contradictory hints coming from the markets and the Feds as to what the Feds say they might do and the current lack of confidence in a rate hike until at least January 2018 continues to drive the dollar.

What now seems apparent to all market participants and concerned authorities is that the Euro-zone economy is currently growing much faster than the US Economy, their growth is currently pinned at 1.6% and 1.2% per annum respectively. Despite the current turn of events, the likelihood of a rate hike anytime soon still seems far-fetched.

Market analysts currently do not see the chances of a rate hike anytime within this year climbing above 60%, since at least 6 months has been erased from hiking expectations by the US GDP report. The Feds will not raise rates mostly because market participants have not priced in an above 60% chance of a rate hike for at least a month. If the US economic reports continue to shock the market with below-expected releases, Fed officials will ultimately have no other option but to re-evaluate their current standing which has been shown to be optimistic, as optimism will only do more harm to the USD.

The GBPUSD pair is currently still in recovery from the lower than expected UK manufacturing PMI that caused its drop to the 1.3160 area, the pair is currently trading at around the 1.3200 level in anticipation of the US PMI data. The initial show of weakness displayed by the pair today was followed by a motivated recovery from the USD, this recovery can also be spotted in the US Dollar Index. In addition to the bad UK manufacturing PMI release, which came at 48.2 when analysts pinned their expectations at 49.1, selling pressure was raised on the GBP. The Bank of England is now being pressured to embark on monetary easing when they reveal their monetary policy decision on Thursday this week.

Despite the status quo, the GBPUSD has successfully recovered from the lower levels it had hit right before the release of the ISM Manufacturing PMI. Overall expectations see the index standing at 53.1 for July, which is slightly lower than the 53.2 that was seen in June. More disappointing data will join forces with last week’s disappointing data to dampen the likelihood of a rate hike by the Fed in 2016.