US dollar index recovered by the end of the past week after dipping to 93.40 on Wednesday, the lowest level since May 6. There was a daily bullish engulfing formed on the daily chart – a signal that dollar may correct a bit higher.
The greenback managed to strengthen mildly against the British pound and the euro, which were hit by the Brexit concerns. At the same time, higher oil prices made American currency weaken against commodity currencies.
This week the market’s attention will be focused on the Federal Reserve’s meeting that will take place on Wednesday. The possibility of a rate hike in June is now estimated by markets as less than 4%, while the odds of July move are seen as only a little over 25%. After weak May nonfarm payrolls report the rate hike on June 15 really is extremely unlikely. Yet, the meeting will be very closely watched, as the Fed’s members will update their forecasts for the Fed’s fund rate. So far, Janet Yellen hasn’t said no to 2 rate hikes this year, and the Fed could stick to this forecast saying that everything will depend on the economic data. If the Fed leaves 2 rate hikes on the table, USD will broadly strengthen. However, if the Fed’s outlook suggests one rate hike this year, USD will decline sharply.
Other important US releases include core retail sales on Tuesday, producer prices on Wednesday, consumer inflation on Thursday and building permits on Friday.