A limiting factor for the USD rebound at this stage is mixed economic data and weaker inflation, including inflation expectations, according to analysts at Amplifying Global FX Capital.
“The market will question the Fed’s resolve to stick to its planned normalization of policy. Faltering confidence in the Trump administration has been weighing on the USD most of this year and this may continue to be a negative factor. At this stage, there is little to suggest that the USD will begin a sustained uptrend.”
“The Atlanta Fed’s GDPNow forecast has slipped through the second quarter from above 4.0% earlier in the quarter to 2.9% last week. The New York Fed Nowcast concurs; it has slipped from around 3.0% to 1.9% last week. After posting only 1.2% q/q saar growth in Q1, this would be a modest rebound in Q2.”
“The New York Fed’s survey of consumers, found that 3-year inflation expectations slipped to 2.47% in May (ahead of the latest weak inflation result), returning to lows earlier in the year.”
“The Citibank economic surprise index for the USA has fallen sharply to -77.5%; if you want to find a positive spin, it may be that rarely does this index fall any lower and the US may be due to show better economic results.”
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