The US dollar is weakening on Wednesday as a rebound in the financial markets and mixed economic data weighed on investors ahead of Christmas. Still, despite the miniature slump, the buck has been one of the top-performing currencies this year. Can the trend continue heading into 2022? It might depend on the data.
According to the Bureau of Economic Analysis (BEA), the gross domestic product (GDP) advanced 2.3% in the third quarter, slightly higher than the market forecast of 2.1%.
The GDP price index in the July-to-September period advanced 5.9%, while GDP sales edged up just 0.1%. Moreover, personal consumption expenditures (PCE) prices surged 5.3% quarter-over-quarter.
Real consumer spending increased by a tepid 2% in the three months ending in September. The Federal Reserve Bank of Chicago’s National Activity Index eased to 0.37. Also, the Conference Board’s Consumer Confidence Index jumped to 115.8 in December.
On the housing front, existing home sales surged 1.9% to 6.46 million in November. According to the Mortgage Bankers Association (MBA), mortgage applications tumbled 0.6%, while the 30-year mortgage rate dipped to 3.27%.
“And it’s good news that despite a broadly stronger US dollar, the Turkish lira managed to consolidate yesterday’s gains at about the 12 level. While I expect the lira depreciation to continue in term, the fact that the carry positions have been nicely cleared over last days massive rally should keep the positive momentum much contained in the dollar-try, at least for the next couple of weeks,” wrote Ipek Ozkardeskaya, a Senior Analyst at Swissquote, in a note.
“Elsewhere, the EURUSD is stuck within the 1.1230-1.1360 range, as the European Central Bank (ECB) hawks would like to take the upper hand due to the rising inflation, but the doves wouldn’t abandon the field as the slowing economic activity due to the omicron wave would prevent the ECB from making any bold move in the coming quarters. Not that the ECB would make any bold moves, but, the bad news support the doves in Europe as the ECB continues downplaying the risks of inflation being ‘not transitory.'”
The US Treasury market was red across the board, with the benchmark 10-year yield down 0.027% to 1.46%. The one-year bill was unchanged at 0.267%, while the 30-year bond dropped 0.038% to 1.859%.
The US Dollar Index (DXY), which measures the greenback against a basket of currencies, declined 0.46% to 96.05, from an opening of 96.47. The index is on track for an annual gain of about 7%.
The USD/CAD currency pair fell 0.54% to 1.2845, from an opening of 1.2913, at 15:27 GMT on Wednesday. The EUR/USD rose 0.43% to 1.1336, from an opening of 1.1289.