US Open Note – Dollar back to gains at the end of the week

Dollar/yen back above 110.00

Prior to the weekend, the dollar is holding onto its recently gained ground, with dollar/yen approaching the 110.00 psychological number. Moreover, the dollar index is currently trading at 92.78, remaining above the 50-day simple moving average (SMA). Euro/dollar is showing some positive movement today, holding near 1.1780. US futures are pointing to a positive open. Headline retail sales in the US were projected to decrease -0.7% m/m but instead gained 0.75% m/m, compared to a revised -1.8% in July.

UK retail sales drive pound lower

The British pound declined below $1.3800 as retail sales for August in the UK fell by 0.9%, marking the fourth consecutive month of declines and falling short of market estimates of a 0.5% increase. Despite a recurrence of coronavirus cases and supply problems, it was the longest period of declines in at least 25 years. The Bank of England is expected to maintain rates at 0.5% on September 23. This would be a dovish move. While the unexpectedly strong CPI numbers had some expecting a hawkish stance, the bank has been warning that inflation could rise higher before coming back near to the 2%. Because of the spike, there's no rush to taper or need to hike vigorously. The latest BoE forecasts won't be released until after the November 4th election. The forecast horizon will be extended to 2024, which will be critical for the bank's future forecasts.

Commodity currencies are weak; gold rises after sharp sell-off

In commodity currencies, the aussie is ticking slightly up above $0.7300; however, the kiwi is still falling below $0.7100. Dollar/loonie is consolidating back and forth between the short-term SMAs and the 1.2760 resistance.

Elsewhere, oil prices are creating some losing days after the aggressive jump above $0.7300/per barrel, while the yellow metal is ticking up following the plunge from $1,800/per ounce again. It is the second straight week of losses for gold as the dollar strengthens and traders look ahead to next week's FOMC meeting for indications on when the central bank will start reducing stimulus.

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