US Dollar bid near 97.00 ahead of US data

The greenback, in terms of the US Dollar Index, managed to revert yesterday’s drop to fresh 2017 lows near 96.30 and is now approaching the key barrier at 97.00 the figure.

US Dollar rebounded on FOMC

The index found much needed oxygen after the Federal Reserve matched expectations on Wednesday, hiking by 25 bp its Fed Funds target range to 1.00%-1.25%.

In addition, the Committee left the door open for an extra hike in H2 while it suggested that the normalization of the Fed’s balance sheet could start soon. Regarding inflation and in the wake of May’s lower-than-expected figures, the Committee revised lower its forecasts although Chief Yellen was confident that the 2% target is achievable.

US yields took a hit following May's inflation prints and retail sales. Despite they managed to gather some traction after recording fresh multi-month lows, they still remain in low levels and could represent a drag on ambitions of the buck to advance further north of the 97.00 handle on a more sustainable fashion.

Market chatter seems to have started to price in the likeliness of September as the most suitable candidate to start the reduction of the Fed’s balance sheet, while the probability of a rate hike in December is at just below 40% according to CME Group’s FedWatch tool.

In the US data space, the usual weekly report on the labour market is due followed by the more relavant Philly Fed manufacturing index for the month of June. Further data will see May’s industrial production and capacity utilization as well as the NAHB index and TIC flows.

US Dollar relevant levels

The index is up 0.01% at 96.92 facing the next up barrier at 97.13 (23.6% Fibo of the May-June drop) followed by 97.47 (high Jun.9) and then 97.70 (high May 30). On the flip side, a break below 96.31 (2017 low Jun.14) would target 95.91 (low Nov.9 2016) and then 94.95 (low Sep.22 2016).