USD Gains Broaden

USD: Clearer positive momentum

The recent trend of “no-landing” in the economy continued yesterday with positive economic data from the US. This data suggests that the expected economic downturn that was supposed to happen in the US in the first half of the year will not happen. Retail sales data from yesterday shows that US consumers are still spending due to the strong job market and savings from the pandemic. This means that the conditions for an economic downturn are not present. The retail sales data shows that every sector saw growth in January, with the largest growth in food and drink sales. The AtlantaNow GDP forecast for Q1 was increased yesterday from 2.1% to 2.4%, and the Empire Survey was also positive, showing the momentum of the economy. This all means that we are far from a recession.

In simpler terms, the US economy is doing well and the recent data on retail sales and GDP growth shows that there will not be an economic downturn soon. The positive data is due to US consumers continuing to spend money, which is keeping the economy strong. This means that the conditions for a recession are not present, and the US economy is still growing.

The recent report on industrial production was weaker than expected due to warmer weather causing a decrease in utility output.

However, manufacturing output increased by 1.0%, showing strength in the industry. The rates market is continuing to rise, and the terminal rate may reach 5.25% - 5.50%. This is good news for the dollar, as it is expected to continue to perform well against other currencies like the AUD and GBP. This is due to factors such as weak UK inflation and equity market weakness in China causing heavy selling. As the US dollar continues to gain momentum, I expect non-dollar currencies to decrease in value over the next few trading sessions.

In simpler terms, the report on industrial production showed that there was weaker output due to warmer weather affecting utilities, but manufacturing output increased. The market rates are continuing to rise, and the dollar is expected to perform well against other currencies. This is due to factors such as weak inflation in the UK and China's equity market weakness. As the US dollar continues to gain momentum, I expect other currencies to decrease in value over the next few trading sessions.

US RETAIL SALES – RESTAURANTS & DINING M/M SURGES

USD: CBO provides bleak update, highlighting risks for dollar

The US dollar has recently been strengthening, but it is expected to weaken over time. The Congressional Budget Office released a report that predicts a weak economic outlook for the US with a significant cut to the GDP growth forecast for 2023.

As a result, the budget deficit outlook has also worsened, and the projected inflation is higher than the Fed's forecast. The deficit is predicted to rise, which is not sustainable in the long run. This report could raise tensions around the debt ceiling issue, which could cause the dollar to decline in value. Investors may become worried if there is no progress on a debt ceiling deal by Q2 this year, and the economy is weakening.

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