US Dollar recovers modestly ahead of US data

NEW YORK (July 17) The US Dollar manages to stay relatively resilient against its major rivals at the beginning of the week as markets adopt a cautious stance. The US Dollar Index (DXY) clings to small recovery gains at around 100.00 on Monday after having lost more than 2% last week.

The US economic calendar will not feature any high-tier macroeconomic data releases that could impact the DXY's movements. Hence, the risk perception could continue to drive the US Dollar's valuation in the second half of the day. 

The US Census Bureau will release June Retail Sales data on Tuesday and the Federal Reserve (Fed) will publish Industrial Production figures.  

Daily digest market movers: US Dollar inches higher on Monday

• China's real Gross Domestic Product (GDP) expanded at an annual rate of 6.3% in the second quarter, according to the release from China's National Bureau of Statistics (NBS) early Monday. This reading followed the 4.5% growth recorded in the first quarter but came in below the market expectation of 7.3%. Citigroup announced that they had lowered the full-year growth forecast for China to 5% from 5.5%.
• The Shanghai Composite lost nearly 1%, while Wall Street's main indexes opened virtually unchanged. 
• US Treasury Secretary Janet Yellen told Bloomberg on Monday that there is a good chance that they will go ahead with outbound investment controls on China.
• The US Dollar weakened last week as soft inflation data from the US revived expectations about the Federal Reserve reaching the terminal rate with a 25-basis-point (bps) rate hike in July.
• The Consumer Price Index (CPI) in the US rose 3% on a yearly basis in June, following the 4% increase recorded in May. The annual Producer Price Index (PPI) edged 0.1% higher in the same period.
• Commenting on the USD's outlook, "In case of an increasingly rapid fall in inflation and weakening economic data, the market might increasingly rely on key rates not remaining at high levels for a long time, whereas rate cuts before the end of the year are becoming increasingly likely," said Antje Praefcke, FX Analyst at Commerzbank. "That would cause the USD to ease further." 
• The University of Michigan reported on Friday that the Consumer Confidence Index improved to 72.6 in July's flash estimate from 64.4 in May.
• The benchmark 10-year US Treasury bond yield holds steady at around 3.8% after having declined nearly 6% last week.
• The Federal Reserve Bank of New York's Empire State Manufacturing Survey for July showed that the General Business Conditions Index declined to 1.1 from 6.6 in June.
• Markets are nearly fully pricing in a 25 bps Fed rate increase in July. The probability of one more rate hike in December stands at around 20%, according to the CME Group FedWatch Tool.
• Other data from China showed that Retail Sales increased 3.1% on a yearly basis in June, down sharply from 12.7% in May, while Industrial Production expanded 4.4% in the same period.

FXStreet