The Greenback accelerated to a fresh 14 year high during trading on Tuesday following the solid US manufacturing data which boosted confidence towards the US economy. Dollar strength may become the new norm this quarter as the combination of repeatedly positive economic data and prospects of higher US rates attract investors to the currency. With the Trump effect still fuelling the bull rally and optimism rising over fiscal stimulus boosting US economic growth, the Dollar may be destined to be a champion amongst other major currencies once again,
Investors may direct their attention towards Wednesday’s Fed meeting minutes which may provide additional clues on rate timings for 2017. Although the Fed gifted the markets a hawkish surprise in December by adopting an aggressive hiking path, the cloud of uncertainty could threaten the central bank’s efforts to raising US rates three times this year. The current sentiment remains bullish towards the Dollar with further inclines expected if the Fed minutes chant a similar hawkish mantra to December’s policy meeting.
Although a rising Dollar may be set to be the next dominant theme this quarter, the concealed concerns over the fiscal stimulus reality failing to meet the market shaking expectations could create some headwinds in the future. As of now, the trend remains an investor’s friend with the Dollars trajectory still pointing to the upside. Technical traders may exploit a decisive breakout above 103.50 to send the Dollar Index towards 105.00.
Commodity spotlight – Gold
Gold could trade in a chaotic fashion this quarter if the messy mixture uncertainty in Europe, Brexit woes, a resurgent Dollar and prospects of higher US rates trigger explosive levels of volatility. The fierce tug of war between risk aversion and rising US interest rates may cause the yellow metal to violently swing between losses and gains. Although Gold prices were elevated on Wednesday following the growing physical demand from major consumers such as India and China, a resurgent Dollar could limit upside gains. Technically, the metal remains under pressure on the daily charts and sellers could utilise the $1175 resistance to drag prices lower towards $1125.