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Can positive economic data support USD?

USD - United States Dollar

The US dollar moved modestly higher against a basket of major currencies after data showed US weekly unemployment claims dropped and second-quarter GDP growth was in line with estimates. The US Dollar Index was up 0.01% to 90.06 at the time of writing.

Gross domestic product increased 6.4% last quarter. That number was unrevised from last month’s estimate reported last month and followed a 4.3% growth rate from the quarter before. There were 406,000 initial unemployment claims for the last week, compared to 444,000 in the prior week, according to the Labor Department. This puts claims below 500,000 for three straight weeks.

The slew of economic data pointing to signs of fresh recovery could fuel further debates among investors about which way the US Federal Reserve could go in response to strengthening the economy.

Key Movers

EURUSD slipped back below 1.22, down 0.07% to 1.218 this morning. Commentary from ECB board members quashed any hope the central bank would reduce bond purchases, suggesting “conditions do not justify reducing the rate of purchases…we need to see a sustained increase in inflationary pressures before we consider tapering.”

The pound was up against the US dollar this morning following a dip from yesterday’s COVID-19 testimony from former UK prime minister aide Dominic Cummings. He suggested the government failed the British public in their handling of the pandemic, contributing to GBPUSD’s drop yesterday. But a Bank of England policymaker commented today that the central bank could raise rates sometime in 2022. This pushed GBPUSD up 0.30% to 1.4163 this morning.

The AUD was one of the worst performers across major currencies yesterday as investors looked to absorb profits on moves approaching 0.78, reluctant to extend gains. Moderating commodity prices, elevated COVID-19 uncertainty and amplified economic tension with China now weigh on near-term AUD demand.

Expected Ranges

EUR/USD: 1.217 - 1.221 ▲

GBP/USD: 1.409 - 1.419 ▲

AUD/USD: 0.772 - 0.775 ▲

USD/CAD: 1.205 - 1.214 ▼