U.S. Dollar Extends Gain As Strong GDP Supports Fed Rate Hike Prospectus

The U.S. dollar continued to be firmer against its most major opponents on Thursday, as the U.S. economic growth accelerated in the second quarter,
backing hopes that the U.S. Federal Reserve will stay on track to raise interest rates in September.

The Commerce Department released a report showing that real gross domestic product increased at an annual rate of 2.3 percent in the second quarter compared to expectations for an increase of about 2.6 percent.

Meanwhile, the first quarter GDP rose by an upwardly revised 0.6 percent compared to the 0.2 percent contraction that had been reported.

Separate data showed that weekly jobless claims rebounded less-than-expected in the week ended July 25th, which came after the Fed upgraded its assessment of the labour market.

The Labor Department report showed that initial jobless claims climbed to 267,000 last week, down from forecasts for an increase of 272,000 claims. The claims fell to 255,000 a week earlier.

The currency has been trading on a firmer footing since yesterday’s late New York deals, after the Fed’s monetary policy statement signaled the possibility of a near-term interest rate hike, perhaps as early as September.

In the accompanying statement, the central bank included some subtle changes that point toward a near-term interest rate hike, although it did not provide a specific timetable.

In early New York deals, the greenback extended rally to 0.9716 against the franc, a level not seen since April 23. This marks a 0.5 percent increase from Wednesday’s closing value of 0.9667. The greenback-franc pair is seen finding resistance around the 0.98 level.

The greenback appreciated to 124.53 against the yen for the first time since June 10. The pair was valued at 123.91 at yesterday’s close. The next possible resistance for the greenback-yen pair may be located around the 125.00 area.

Data from the Ministry of Economy, Trade and Industry showed that Japan’s industrial output rose a seasonally adjusted 0.8 percent on month in June.

That beat expectations for an increase of 0.3 percent following the 2.1 percent contraction in May.

The greenback, which ended Wednesday’s trading at 1.0979 against the euro, spiked up to a weekly high of 1.0923. On the upside, the greenback is likely to challenge resistance around the 1.08 zone.

Survey results from European Commission showed Eurozone economic confidence rose unexpectedly to a four-year high in July.

The economic sentiment index came in at 104 in July. Economists had forecast the indicator to fall to 103.2 from 103.5 in June.

The greenback moved up to a 2-day high of 1.3024 against the loonie, 3-day high of 0.6579 against the kiwi and more than a 6-year high of 0.7254 against the aussie, compared to Wednesday’s closing values of 1.2943, 0.6663 and 0.7293, respectively. If the greenback extends its uptrend, it may find resistance around 1.32 against the loonie, 0.65 against the kiwi and 0.71 against the aussie.

On the flip side, the greenback was lower against the pound with the pair trading at 1.5627. The currency has thus fallen by 0.25 percent from an early high of 1.5588. At yesterday’s close, the pound-greenback pair was worth 1.5596.

The material has been provided by InstaForex Company – www.instaforex.com