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US Dollar Finds Safe-Haven Support As Consumer Spending, Personal Income Plunge

The US dollar is finding support for its safe-haven appeal amid disappointing economic data and modest gains in the financial markets. The US Dollar Index (DXY), which measures the greenback against a basket of currencies, is looking to add…

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The US dollar is finding support for its safe-haven appeal amid disappointing economic data and modest gains in the financial markets. The US Dollar Index (DXY), which measures the greenback against a basket of currencies, is looking to add to its weekly gain, defying last year’s bearish market consensus by rallying more than 3% year-to-date. With uncertainty surrounding the coronavirus pandemic and the US central bank, can the buck sustain its rally?

According to the Bureau of Economic Analysis (BEA), personal income tumbled 7.1% in February, slightly better than the median estimate of 7.3%. This is down from the 10.1% surge in January. The biggest fall on record is being attributed to a decline in government social benefits.

Personal spending also eased last month, sliding by a worse-than-expected 1%. The median estimate was a 0.7% drop. This was the largest contraction in consumer spending since April when it crashed 12.7%. Consumption of durable goods fell 4.7%, non-durable goods dropped 2%, and services edged up 0.1%.

New Census Bureau data found that wholesale inventories rose 0.5% in February, down from the 1.4% boost in the previous month.

The US trade deficit widened in February, climbing 2.5% to a record high of $86.72 billion. Exports fell by $5.1 billion to $103.1 billion, while imports shed $3 billion to $216.9 billion.

On Friday, the University of Michigan released its final readings for March: current conditions rose to 93, consumer expectations advanced to 79.7, consumer sentiment increased to 84.9, five-year inflation expectations rose to 2.8%, and overall inflation anticipation dipped to 3.1%.

Earlier this week, the final reading for the fourth-quarter gross domestic product (GDP) growth rate was 4.3%, beating economists’ predictions of 4.1%.

The bond market was mostly in the green to close out the trading week, with the benchmark 10-year Treasury yield up 0.035% to 1.649%. The one-year bill was unchanged at 0.66%, while the 30-year bond surged 0.031% to 2.365%.

The DXY tacked on 0.2% to 92.72, from an opening of 92.53.

The USD/CAD currency pair slumped 0.32% to 1.2575, from an opening of 1.2614, at 16:37 GMT on Friday. The EUR/USD rose 0.31% to 1.1800, from an opening of 1.1766.


© AndrewMoran for Forex News, 2021. |
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