Dollar Rate Today: Forecasts Warn of USD Strength as a Busy Week of Data Releases Head in the Right Direction

Currency traders will be closely monitoring the FOMC decision (Wed) and the July nonfarm payrolls data on Friday.

At the time of writing we see markets are taking a firm pro-dollar bias:

• The pound to dollar exchange rate (GBP/USD) is today 0.22 pct lower on last night's close having achieved 1.6907.
• The euro to dollar rate (EUR/USD) is 0.22 pct lower at 1.3379.
• The US dollar to Canadian dollar exchange rate (USD/CAD) is 0.47 pct higher at 1.0905.
• The Aus to US dollar (AUD/USD) rate is 0.72 pct lower at 0.9316.

Please note that retail currecy rates are subject to substantial spreads when delivered by your bank. An independent FX provider can deliver up to 5% more currency in some cases by getting closer to the market rate.

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Potential gains for USD in the near-term

The dollar has had a strong July with gains against a string of majors including the euro and pound sterling.

Dominating the forecast for the USD will be the string of key releases this week.

"USD moves will be dependent on the data. The FOMC meeting is unlikely to reveal any substantial changes to the monetary policy stance. Instead Q2 GDP and payrolls pose the greatest uncertainty for USD. A rebound in activity is expected in Q2 after the weather affected weak Q1 GDP. Our economists forecast a firmer rebound of 3.5% q/q saar compared to market consensus of 3.0%. The more timely labour market data may overshadow the other US releases this week, and have greater impact on the USD," says a morning foreign currency note issued by Lloyds Bank Research.

Lloyds note the employment data has so far been encouraging and is expected to show a sixth consecutive 200k rise in non-farm payrolls in July, suggesting potential for USD gains.

Euro dollar rate forecast: EUR/USD remains bearish

Regarding the technical outlook for the world's most heavily traded pairing Swissquote Research note a bearish trend is now in place which suggests further losses are possible:

"EUR/USD extended weakness to 1.3422 on Friday and made a quiet start to the week. The pair consolidated losses in Asia. The sentiment remains bearish, combined to upside USD potential this week (FOMC, NFPs). Bids are eyed at 1.3400+, while decent option related offers wait to be activated at 1.3400 for the week ahead. Resistance should come into play at 1.3550 (last week high)."

Pound dollar forecast: GBP/USD softer?

Regarding the outlook for Cable, analyst Karen Jones at Commerzbank tells us:

"GBP/USD’s failure at the 1.7195 resistance is increasingly looking like that was the end of the bull move It has broken down as expected from its expanding top formation. Intraday we would allow for a small rebound from the 1.6955/55 day ma, but note intraday rallies are indicated to terminate circa 1.7035 and remain capped by the 20 day ma at 1.7099.

"Current trade: Short 1.7103. Recommended Trade: Lower the stop from 1.7110 to 1.7100. Exit 1.6905."

Australian to US dollar forecast: Neutral in the short-term

Guidance on the AUD/USD in the medium- to longer-term is offered by ICN Financial:

"The pair is trading with downside bias after finding strong resistance at 0.9460 and testing now the MA 50 that offers good support at 0.9355. The pair should break one of the aforementioned to confirm the next move. A breakout below the support will halt the positive expectations and push the pair toward 0.9185 areas mainly."

Market update: USD strength and EUR weakness

As mentioned earlier, the US dollar has become the currency to beat in recent weeks.

The US dollar index rose to its best level in seven weeks towards last week's close, buoyed by a strong decline in jobless claims and the resulting move higher in Treasury yields.

"The greenback has been underpinned by recent comments from Fed Chair Janet Yellen, who said that a faster improvement in labor markets could prompt the Fed to begin raising rates sooner than expected. The impressive claims data, which saw the number of Americans filing initially unemployment claims fall to its lowest level since February 2006 suggested that jobs markets are indeed improving at a faster clip," says Omer Esiner at Commonwealth FX.

Another strong payrolls number in early August could finally see Treasury yields and the dollar break meaningfully higher suggests Esiner.

Meanwhile, the shared currency continues to experience tough conditions.

The euro slid to a new eight-month low overnight after Germany’s Ifo survey, a closely watched gauge of business sentiment in the 18-member bloc’s largest economy fell for the third month in a row.

"The drop in the forward-looking gauge of Germany’s economy was likely a reflection of mounting geopolitical uncertainty and potentially stricter sanctions against Russia, a major source of Germany’s energy needs. The figures do little to assuage mounting deflation worries in the euro zone or alter expectations for additional monetary support from the ECB in the months ahead," says Esiner.