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Weak US dollar a boon for exporters

Daily Currency Update

American exporters could benefit from the Federal Reserve’s new inflation policy if the US dollar continues to weaken against other major trading partners.
Last Thursday, Federal Reserve Chairman Jerome Powell announced that the Federal Reserve would map inflation to a 2% average increase. Since the announcement, foreign buyers have seen their buying power increase each day.
EURUSD broke through 1.18 and then upward to 1.19. GBPUSD was up 2.3% and hit 1.33 over the weekend. AUDUSD was up 2.7% and teased 0.74 this morning. USDCAD again looked to crash through 1.30.
A weaker US dollar would allow top American exporters, like those of machinery, fuels, vehicles and other products to sell more goods at lower costs than we’ve seen in the previous months. That could be a boon for the US economy as it continued to manage the spread of COVID-19.

Key Movers

Looking ahead this week, on Tuesday the Reserve Bank of Australia (RBA) will meet. The official cash rate is expected to remain at 0.25% however all attentions will turn to the RBA Rate Statement, which is focused on the outlook. On Wednesday the Australian Bureau of Statistics will release the quarterly Gross Domestic Product (GDP) figures, which is forecast to be down -6.0%. On Thursday we will see the release of the monthly Trade Balance figures. Finally, on Friday we will see the release of the monthly Retail Sales data, the primary gauge of consumer spending. From a technical perspective, the AUD/USD pair is currently trading at 0.7362. We continue to expect support to hold on moves approaching 0.7325, while now any upward push will likely meet resistance around 0.7400.

Expected Ranges

  • EUR/USD: 1.188 - 1.195 ▼
  • GBP/USD: 1.330 - 1.339 ▼
  • AUD/USD: 0.734 - 0.739 ▼
  • USD/CAD: 1.302 - 1.310 ▼