Dollar to Dominate until Greece a Done Deal

The dollar cannot stand still, being driven higher this week mostly on risk aversion. The healthy dollar demand seems a tad more exaggerated as we head into the Memorial long weekend. It’s not a surprise to see liquidity currently at a premium. With the Cbanks in European and Japan continuing to expand their balance sheets, ongoing periphery contagion concerns trumping any US headwinds, it’s no wonder that the market expects the greenback to outperform all growth currencies. The emerging markets should be handled differently. Next week is a big week on the payroll front. The general feeling is that NFP will not have grown fast enough this month to get many people exited or slow enough for many to be concerned. The first realistic stab is for a neutral +160k print. This market is bearish on risk, but is that percentage improving? It will when Greece is a done deal.

Below are some other highlights of the week:


  • FED: Atlanta Fed President Lockhart (voting member) said the Fed needs to retain the option of a new round of bond buying as the US faces risks from the weak economies of Europe. He also indicated this week that ‘Operation Twist’ will likely end on schedule next month.
  • USD: Existing home sales for April were up +3.4% to +4.62m, just above market consensus of +4.6m. March was revised down a tad to +4.47m from +4.48m. The inventory of unsold homes was up about +9.5%, bringing the months’ supply figure up from 6.2 to 6.6, which is consistent with the pattern for recent years and marks the lowest months’ supply in six-years.
  • USD: The Richmond Fed’s survey eased in April, with the headline manufacturing index dropping from +14 to +4, indicating the slowest growth of the year to date, while the service-sector revenue index slid from 0 to-2, the first negative reading in six-months. The manufacturing internals were weak, shipments falling to 0, forward looking new orders dropping to +1 and wage index to +6. On the plus side, the employment index rose to +16, while the service employment index rallied to +10.
  • CAD: Canadian March Retail sales were mixed with a monthly sales gain of +0.4%, slightly ahead of expectations for a +0.3% rise. Retail sales ex-autos were up +0.1% vs. a +0.5% expected rise.
  • USD: April’s US new home sales rallied +3.3% to a seasonally adjusted annual rate of +343k, which is +9.9% higher year-over-year. Even more encouraging was the rise in home prices, up +1.8% to a seasonally adjusted basis in March.
  • USD: The weekly EIA report showed that crude inventories rallied +0.9m barrels, w/w.
  • USD: US weekly claims ticked down -2k to +370k last week. This may suggest that this month’s payroll data may be more robust than first thought. The four-week moving average moved down -5.5k to +370k.
  • USD: April durable goods orders came in up +0.2%, below expectations of +0.5% gain. Ex-transport orders were even weaker, sinking -0.6% vs. an expected gain of +0.9%. The non-defense capital goods ex-air (a proxy for business investment) was very weak falling -1.9% vs. +0.7% rise.
  • USD: The new market flash PMI showed a reading of 53.9 this month, down from its debut reading of 56.0 in April.
  • Fed: Dudley’s (Reserve Bank of NY) expectations for growth are “pretty disappointing” at +2.4%, which he believes is sufficient to keep policy makers from easing monetary policy.
  • USD: University of Michigan sentiment ended the week being a surprise stronger on Friday (79.3 vs. an expected 77.8 unchanged). Amongst the details, conditions nudged up 0.1 (87.2), while expectations leaped 2.8 to 74.3.



ASIA Week in FX



  • Confidence reports come to us from the US and NZD
  • CHF and AUD deliver sales reports
  • CAD and USD release growth data
  • Manufacturing data is presented by CNY and USD
  • Irish dominate the EUR stability treaty vote mid-week
  • Employment prints dominate USD by week end


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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell