By fxtimes.com
Highlights:
- US dollar index falls below 100.0, as markets shift their attention to the FOMC.
- US industrial production rises only 0.1% in February, as manufacturing and mining output decline.
- NAHB housing market index falls to 53 in March from 55 in February.
The US dollar index eased off 12-year highs on Monday, as disappointing economic data clouded an otherwise bullish outlook on the greenback ahead of the Federal Open Market Committee meetings.
The dollar index declined 0.7 percent to 99.62 after powering to a new 12-year high last week. The dollar is enjoining its strongest rally in decades, having gained 25 percent since July of last year.
In economic data, industrial production rose slower than forecast in February, as inclement weather weighed on manufacturing output.
Industrial production – a key measure of manufacturing, utilities and mining output – rose 0.1 percent in February, the Board of Governors of the Federal Reserve System reported on Monday. The gains were led by a surge in utility output, which benefited from unusually cold temperatures. Manufacturing and mining production declined, a sign of weak demand and further cuts in the energy sector.
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Separately, the National Association of Homebuilders (NAHB) said builder confidence unexpectedly declined in March, as supply chain issues and labour shortages weighed on the market. The housing market index declined to 53 in March from 55 in February, as current sales and buyer traffic each declined.
The dollar’s big test will come Wednesday when the Federal Reserve releases its March rate statement. Rate-hike speculation has been the major catalyst of the dollar’s resurgence over the past half-year. The Fed is likely preparing to raise short-term interest rates in the near future, although the exact date is still uncertain. The dollar is expected to reach new highs against its basket of trade-weighted peers should the central bank drop the word “patient” from its official rate statement later this week.
Accompanying the Fed’s policy announcement will be a summary of economic projections, including the “dot plot” chart of interest rate expectations. The December projections showed policymakers expected interest rates to average more than 1 percent by the end of 2015.
By fxtimes.com
