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US Dollar strength forecasted to take global forex markets into the weekend

The US dollar (Currency:USD) is the driving force on global markets on Friday afternoon in London. A look at the spot markets shows:

The pound to US dollar exchange rate is half a percent in the red at 1.5642 at 14:22 in London.
The euro to US dollar exchange rate is 0.47 pct down at 1.3313.
The Australian dollar to US dollar exchange rate is 0.24 pct lower at 0.9616.
The US dollar to Canadian dollar rate is 0.18 pct higher at 1.0178.

Please be aware that the above quotes are taken from the wholesale markets and your bank is able to add their own spread at will. However, an independent FX provider will actively seek to undercut your bank's offer, thus delivering you more currency. Please find out more here.

The U.S. dollar recovered from yesterday’s four-month trade-weighted low overnight, with investors booking profits and squaring positions ahead of the weekend.

The dollar fell under broad selling pressure this week, despite generally strong economic reports yesterday.

"Traders have trimmed exposure to the greenback ahead of next week’s Federal Reserve meeting where Chairman Bernanke is expected to clarify the bank’s outlook for monetary policy. Recent talk of the Fed tapering its $85 billion in monthly bond purchases triggered a wave of global market volatility that has sent riskier assets tumbling and the yen sharply higher," analysts at Commonwealth Foreign Exchange tell their clients.

us dollar exchange rates

It is widely believed that if Bernanke tries to assuage markets by saying the Fed remains committed to keeping monetary conditions very accommodative, the dollar would fall further.

Data this morning, including PPI, industrial production and the University of Michigan’s sentiment index will be closely watched.  

US data today: Industrial production, PPI, TIC flows, Capacity Utilization

There’s a lot of US data to comb through today and that should attract the market’s attention for the early part of our session (see over for details).

"We look for the market to react to the tone of the data (modest downside misses are perhaps the risk relative to market expectations for industrial production and the widely followed U. Michigan consumer sentiment data)," says Greg Moore at TD Securities.

Looking at the data releases already out we see:

Industrial production remained unchanged in May according to data provided by the Federal Reserve. The flat reading came in below market's expectations of a 0.2% gain.

Meanwhile, April's output was upwardly revised to a decline of 0.4% from a 0.5% drop previously estimated.

US Capacity Utilization down to 77.6% in May from 77.7% in April.

TIC long-term flows -$37.3 billion. US Total Net TIC Flows improves to $12.7B in April from $2.1B in March.

The Current Account deficit rose to $106.1 billion in Q1.

PPI rose 0.5% MoM in May. The year on year inflation figure measured at 1.7 pct - ahead of consensus forecasts of 1.4 pct.