Dollar Gains on Positive US Data

The US dollar gained Friday after US data showed a deceleration of US job losses leading many Forex traders and investors to speculate that the world’s largest economy is starting to recover. Usually the dollar declines after positive data as risk sentiment rises but this time the dollar’s reaction to positive economic data is starting to change. Since the recession began negative economic data has caused Forex traders and investors to seek the safe haven of the US dollar.

Dollar Returning to Fundamentals

Data from the US Labor Department showed better than expected results and US employers cut approximately 247,000 jobs in July. Other US data from the housing and manufacturing industries showed improvement raising hopes the US economy will perform better than most developed nations. Joseph Trevisani of FX Solutions stated, “This a sign that the currency markets are weaning themselves from ‘the good news is bad news’ for the dollar syndrome and returning to fundamental measures of economic growth and interest rate cycles.”

US Emerging From Recession

The US unemployment rate fell from 9.5% to 9.4% the first decrease in the unemployment rate since April 2008. Many forex traders and economic experts see the data coming from the US as a sign that the American economy is quickly emerging from the global recession. Greg Salvaggio of Tempus Consulting said, “We’ve seen improvement in housing, in manufacturing output and now clearly in the job environment. Add this up and it will eventually lead to dollar gains as we think the U.S. economy will emerge more quickly from recession,” he added. “This could be the start of the unwinding of the inverse stocks-dollar correlation.”

Busy Calendar This Week

A surprising move by the Bank of England to engage in more quantitative easing affected the pound and forex traders and forex investors will be watching Tuesday’s upcoming Federal Reserve meeting closely. The upcoming week will be busy with the Fed meeting, June’s international trade data due on Wednesday, retail sales for July on Thursday and industrial production and consumer sentiment on Friday.