Three reasons why US dollar could likely to regain uptrend
Weak US data releases on Monday stopped dollar’s rally started last week after they spotlighted poor performance in construction and manufacturing sectors in the United States last February, according indicators released at the start of Wallstreet trading session in the first day of the week.
In January, US construction spending declined by 0.2% month-over-month, slightly above expectations of a 0.1% slump, which marks the lowest level in four months.
February US ISM Manufacturing Index declined by 0.6 points to 50.3, falling short of expectations ?of 50.7.
In spite of today’s slump, the greenback could make gains throughout the coming days buoyed by economic data which stressed that U.S. economic growth decelerated in the fourth quarter. This loss of momentum seems to have continued into the early part of this quarter, influenced by cold weather and concerns that tariffs may raise prices and affect spending.
The Bureau of Economic Analysis (BEA) reported in its second GDP estimate for the fourth quarter that Gross Domestic Product (GDP) grew at an annualized rate of 2.3%, down from the 3.1% pace recorded in the July-September quarter.
Annual inflation in the United States, as indicated by the Personal Consumption Expenditures (PCE) Price Index, declined to 2.5% in January from 2.6% in December, according to a report by the US Bureau of Economic Analysis on Friday.
The core PCE Price Index, which excludes volatile food and energy prices, increased by 2.6% year-over-year in January, down from 2.9% in December. This result was in line with market expectations. On a monthly basis, both the PCE Price Index and the core PCE Price Index rose by 0.3%, as anticipated.
There us also a source of support which could push USD in the uptrend; the clash occurred between President Donald Trump and Ukrainian President Volodymyr Zelensky in the white house on Friday, which rapidly devolved into a contentious exchange, leaving onlookers stunned and heightening uncertainty about the future of a potential U.S.-Ukraine agreement on natural resources.
This is certainly a huge source of risk aversion which plays for the good of the US currency.
President Trump is poised to test the boundaries of his executive authority as he seeks Congressional approval for tax cuts and other key elements of his legislative agenda.
Senate Majority Leader John Thune of South Dakota is rallying the GOP majority to pass what Trump describes as a "big, beautiful bill" that extends existing tax breaks and introduces new ones, potentially boosting the value of the dollar.
Trump’s tariff rhetoric also serves as a catalyst which pushed the dollar up as this trade policy is an inflationary effect on economy and may push the Fed towards keeping high interest rate.
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