The US dollar ended the week lower against all of the major currencies on the back of softer economic data. Instead of improving, the Empire State manufacturing index dropped to a 22 month low in the month of March while industrial production grew less than expected. The University of Michigan Consumer Sentiment index increased but the improvement also fell short of expectations. In response, Treasury yields turned lower and the dollar head south. The US dollar has been in an uptrend for most of the quarter but as we head into next week's Federal Reserve meeting, investors could send the dollar lower.

No changes are expected from the US central bank but press conferences follow every meeting this year and Chairman Powell's comments could hurt more than help the greenback. Even though there have been more improvements than deterioration in the US economy since the last central bank meeting, the Fed is in no rush to raise interest rates. Last week, we learned that retail sales increased by only 0.2% in January as payroll growth slowed to 20K in February. The housing market has peaked with rising interest rates slowing new and existing home sales growth. While manufacturing and service sector activity recovered, the US trade deficit hit an all time high. Most importantly, inflation is low with consumer price growth easing to 1.5% from 1.9% in February. So even if the central bank finds the uptick in confidence, wages, economic activity encouraging, low inflation gives them the flexibility to hold off tightening until there's signs of consistent strength in the economy. When the Fed last met, the dollar plunged after they removed the reference to further gradual rate increases from their monetary policy statement. We don't expect the dollar to crash at this upcoming meeting but we can expect Powell to his "patient" approach on rates, which could be enough to encourage profit taking on long dollar positions.

One of the primary reasons why the dollar outperformed in the first quarter is relative weakness abroad but as some big uncertainties subside, money could flow back into riskier currencies and riskier assets. Britain still doesn't have a Brexit deal but at least we know that they won't be spinning out without an agreement. Slower growth in China has been a big problem for the rest of the world but tax cuts could provide a big boost to the economy. The prospect of improvements could make other investments more attractive, easing demand for US dollars even as the US economy outperforms. In the long run however, demand for the greenback should remain strong as the Fed remains the only major central bank to raise interest rates this year.   USD/JPY is in an uptrend but if it falls back below 111, we should see a deeper slide towards 110. The Bank of Japan left interest rates unchanged last week but lowered its export and output assessment in response to terrible trade numbers.

Past performance is not indicative of future results. Trading forex carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade any such leveraged products you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading on margin, and seek advice from an independent financial advisor if you have any doubts.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD marginally higher at around 1.1020

The EUR/USD pair is trading slightly higher but within familiar levels following the German ZEW survey, which showed that sentiment improved in September. Traders cautious ahead of Fed’s announcement this Wednesday.

EUR/USD News

GBP/USD seesaws around 1.2400, as fear eases

The negative sentiment that ruled financial sentiment ever since the week started began easing, leading to some dollar’s selling. GBP/USD stuck ahead of the UK Supreme Court ruling on PM Johnson’s Parliament suspension.

GBP/USD News

USD/JPY finds buyers again ahead of 108.00

USD/JPY found buyers once again near 108.05 despite risk-aversion on poor Chinese data, as markets gear up for key central banks' events this week. Uncertainty over the US-Japan trade deal seems to keep the Yen under pressure. 

USD/JPY News

Gasoline and the Gulf

The attack on the Saudi Aramco refinery sent crude prices soaring on Monday and those increases will  begin to affect US retail gasoline prices perhaps as soon as the end of this week. But unless fuel prices break higher, they are unlikely to impact the economy in any serious fashion.

Read more

Gold: Pivots around $1500 mark, above ascending trend-line/23.6% Fibo. confluence support

Gold once again managed to find some support near a 3-1/2-month-old ascending trend-line and has now moved into the positive territory, with bulls looking to extend the momentum further beyond the key $1500 psychological mark.

Gold News

Forex Majors

Cryptocurrencies

Signatures