Dollar Rebounds after Blow from US GDP Data

In the report of a lower-than-expected growth data in the US, the greenback had fallen last Friday. Today, however, the greenback managed to bounce back, nursing its losses.

On Monday, the dollar tended its losses from lows it reached after the announcement of a downbeat US growth data report before the weekend.

In a note by Marc Chandler, the global head of currency strategy at Brown Brothers Harriman, it was written that “the US dollar advance was stopped in its tracks by the disappointingly weak Q2 GDP figures.”

The dollar index was higher at a meager 0.1% at 95.578, recovering from its Friday trough of 95.384, the lowest level last seen on July 5.

Meanwhile, the euro nudged higher 0.1% to $1.1176 while the sterling climbed 0.2% to $1.3251. Investors turned their attention to the Bank of England’s decision on Thursday.

The Australian dollar was trading higher at $0.7608.

Elsewhere, non-farm payrolls report for July will be released on Friday. In a poll by Reuters, economists predict an increase of 175,000 jobs, lower from June’s 287,000 gain. Jobless rate is forecasted hovering steady at 4.9%.

US GDP Report, Rate Hike

The Commerce Department data revealed previously on Friday that growth domestic product for the US rose at a measly annual 1.2% in the April-June period, unable to beat the forecasted 2.6% growth by Reuters-polled economists.

The weaker-than-expected GDP figures followed a strong US non-farm payrolls report for the month of June, as well as improving inflation, retail sales and unemployment claims numbers, that had initiated investors to raise their positions on dollar.

Market watchers increased the bullish greenback bets to the highest level in almost five months, with the value of the dollar’s net long position growing to $13.66 billion in the week finished July 26 from $10.42 billion in the preceding week, based from Reuters calculations and data coming from the Commodity Futures Trading Commission reported before the weekend.

Chandler added that the dollar index’s next immediate technical target is 94.75, as market rumors of a near-term rate increase by the Federal Reserve continue to wane. “The FOMC statement earlier in the week did not leave the impression that a September hike was likely, and with the poor growth numbers, the odds were downgraded further.”

New York Fed President William Dudley stated at an international central bankers conference in Bali today that the US central bank could push rates higher before the US presidential election on November, should the economy and jobs market progress rapidly.

However, Dudley added the Fed should be wary when pondering a rate increase due to lingering threats to the world’s largest economy.

Meanwhile, Dallas Fed President Robert Kaplan told reporters following the release of the GDP figures that the central bank should not react excessively to the weak growth data, but needed to consider more data before planning another increase.

CME Group’s FedWatch gauge revealed that interest rate futures possessed a 33% chance last week Friday of a rate hike by the Fed in December, lower from Thursday’s 43%.

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