Dollar Regains Strength on US Statistics, COVID-19 Tracked

Azeez Mustapha
27 July 2021 | Updated: 27 July 2021

The dollar is growing amid uncertainty and ahead of the release of important data. The sluggish sentiment is affecting the broader markets and pushing the safe-haven dollar higher. Coronavirus cases in the United States continued to rise, with authorities in several jurisdictions demanding vaccinations for government officials. The rapid proliferation of the Delta variant will be one of the topics on the Fed’s agenda as it kicks off its two-day meeting due to close on Wednesday. The bank intends to leave its policy unchanged, leaving the door open for narrowing the bond-buying scheme but refrain from hinting at an imminent step.

Ahead of the Fed meeting, investors will be watching US durable goods orders for June, which are forecast to rise in both general and key terms. The Conference Board Consumer Confidence Index for July is also under scrutiny. The economic calendar indicates an increase in basic orders by 2.3% and by 0.5% – for unused ex-air. If the numbers do not live up to expectations, especially the latter, the dollar has room to fall.

However, volatility could be muted as Tuesday’s publication comes out just a day before a crucial Federal Reserve meeting. Markets are likely to be under pressure, ahead of hints from Fed Chairman Jerome Powell about a bank bond purchase scheme. Unless durable goods are shockingly high or low, the Fed is likely to remain unchanged, as will the dollar.

Dollar Index Regains Amid COVID-19 Concerns

Investors’ attention, meanwhile, remains focused on global delta coronavirus developments, economic recovery, and the upcoming FOMC event on Wednesday.

The US Dollar Index (DXY), which tracks the dollar against a number of its major competitors, is managing to regain some calm and move towards the 92.70 regions. The index partially eases the pessimism seen at the beginning of the week, and it manages to overcome the area of ​​recent lows around 92.50 and reorient to gains around 92.70 on Tuesday.

The index reversed two sessions in a row with gains on Monday. The move was driven by stable US yields and modest improvement in risk-related metrics, prompting the dollar to continue deviating from its monthly highs around 93.20 last week. Meanwhile, bouts of risk aversion in response to coronavirus fears, strong economic recovery, high inflation, and the outlook for earlier-than-expected quantitative easing/rate hikes remain factors contributing to further dollar gains.

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Azeez Mustapha

Azeez Mustapha

Azeez Mustapha is a trading professional, currency analyst, signals strategist, and funds manager with over ten years of experience within the financial field. As a blogger and finance author, he helps investors understand complex financial concepts, improve their investing skills, and learn how to manage their money.