Dollar Declines Amid Disappointing Housing, Sentiment Data

  • Weak data underscore concerns about Fed tightening path
  • Goldman lowers long-term USD outlook, says bull run to end

The dollar was on track for its third straight losing week, with Friday’s declines extending to as much as 0.4 percent after a surprise drop in housing starts added to concerns about the U.S. economy.

The greenback declined versus all of its G-10 peers Friday, ending a week that also saw lower-than-expected inflation data, retail sales and industrial production. The weaker data underscore skepticism that the Federal Reserve will be able to raise rates in the second half of the year, as outlined in projections released Wednesday. After tightening for a second time this year, the Fed forecast a third hike and the start of unwinding its balance sheet later in 2017.

  • The Bloomberg dollar index reached a session low as housing data missed estimates and later extended losses after preliminary June U.S. consumer sentiment was weaker than expected
  • Goldman Sachs lowered its long-term USD outlook, saying the dollar’s bull run should conclude over the next 18 months given stronger and more synchronized global growth than previously expected; EUR/USD 12-month forecast at 1.05 and GBP/USD 12-month forecast at 1.20 now mark respective low points for each pair, the firm says
  • EUR/USD is trading near a fresh session high of 1.1200 reached after the consumer sentiment survey added to USD woes and options expiries rolled off. EUR/USD was initially capped by option-related offers ahead of $3.2b of 1.1200 expiries. Price congestion at the area near the June 13 high of 1.1225 could also slow upward momentum
  • USD/JPY is trading ~110.79, not far from session low of 110.65 seen as UST yields dropped. The pair has support at its 200-DMA of 110.68, its June 14 high of 110.34 and an Ichimoku conversion line at 110.10
  • GBP/USD is trading at ~1.2787 after a recent session high at 1.2805 vs a 55-DMA of 1.2801. Few offers are seen near the figure, according to traders who asked not to be identified because they are not authorized to speak publicly. The pound is rising for a second consecutive day and is on track to see a weekly gain of about 0.34 percent

— With assistance by Robert Fullem

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