The U.S. Dollar Rises Again

The Greenback rallies; the Loonie and Euro fall.

I was a bit perplexed, to be honest, as to why the U.S. Dollar has been advancing of late, despite the Federal Reserve's consistent attempts, it would seem, to debase it. But the economy and markets are volatile institutions, and even a seasoned old trader like myself is, I hesitate to write, wrong on occasion.

But of course I'm happy to see the dollar going up, and through some last minute trades on iFOREX I haven't suffered too much despite my initially incorrect predictions. I recovered just enough as the Dollar advanced yet again against the Loonie and Euro on the heels of some favorable inflation metrics. This can be contrasted against the ongoing, potentially detrimental "lowflation" in the Euro-zone; interest rates can, contrary to popular opinion, get too low. Fortunately for Europe, those rates haven't stunted any Euro-zone recovery yet, and the April purchasing managers index rose again, but it's debatable how long that trend will last.

The ZEW index, for instance, which measures economic sentiment in Germany, dropped to 43.2%--its lowest in eight months. This is all in conjunction with some unfavorable politics, as the E.U. and U.S. continue their plans to impose sanctions on Russia regarding the Ukraine; many hope the crisis will be averted following a meeting in Geneva, although FOREX markets continue to demonstrate concern.

The decrease in the Loonie, however, is a bit more of a mystery, since sales in the manufacturing sector were actually higher than predicted, increasing by 1.4%. Gold, too, dropped surprisingly to a five day low, although this may not have as much impact on the U.S. dollar as U.S. retail sales and improving inflation rates.

Fed Chairperson Janet Yellen gave a speech shortly after the better-than-expected news; the dollar not only increased against its trading counterparts, but U.S. retail sales increased much more than predicted, as well. So, too, did consumer price inflation, which climbed 0.2% instead of the predicted 0.1%, further signalling momentum, although the manufacturing index fell to 1.3% following a more successful march.

Obviously there's no predicting the FOREX to any degree of certainty; but if U.S. retail sales continue to main solid, and its interest rates moderate in comparison to the Euro-zone's miniscule rates and political upheaval, then the dollar could very well continue its surprising climb. Stranger things have happened in the markets; that much I know.