US Dollar (USD) Exchange Rate Static after US Data, Fed Testimony

The US Dollar remained trading around the day’s opening levels against the Euro, Indian Rupee and British Pound on Tuesday as investors responded to mixed economic reports from the world’s largest economy and unrevealing comments from the Federal Reserve’s Chairwoman. The ‘Greenback’ began the day in a slightly stronger position as Greece-inspired risk aversion pushed investors towards safe-haven assets. However, the US Dollar pared gains after it was announced that the fiscal reforms proposed by Greece have been accepted and that the nation has been granted a four-month extension to its current bailout programme. Demand for the US Dollar was also limited as the gauge of domestic Consumer Confidence tumbled to 96.4 in February from 102.9 in January. A more encouraging reading of 99.5 had been projected.

According to industry expert Paul Wiseman; ‘Consumers are modestly less confident about current economic conditions and considerably less confident about the next six months. They are slightly more likely to say jobs are "hard to get" than they were in January. A year ago, the consumer confidence index was a much lower 78.3. The rising confidence over the past year reflects in part a stronger job market. Employers added more than 1 million jobs from November through January — the best three months of hiring since the fall of 1997.’

However, declination in the US Dollar was limited as the Markit Services and Composite PMI’s showed improvement. The services gauge jumped to 57.0 from 54.2, prompting this response from Markit economist Chris Williamson; ‘Alongside the upturn signalled by the sister ‘flash’ manufacturing PMI survey, the improved performance of the service sector in February means the economy looks to be enjoying yet another spell of robust growth in the first quarter. The two PMI surveys are so far running at a level consistent with at least 3.0% annualised GDP growth. While the overall rate of business expansion has cooled from the surging pace seen in the middle of last year, growth remains buoyant and, importantly, strong enough to drive yet another month of impressive job creation. The Fed will no doubt be encouraged by the resilience of the economy in the face of global headwinds such as the Greek and Russian crises, and increasingly minded to start the process of normalising monetary policy in June on the basis of these impressive survey results.’

Although Fed Chairwoman Janet Yellen’s testimony to congress had been hotly anticipated, the central bank official offered little to no fresh information and her speech had minimal impact on US Dollar trading. The North American currency could fluctuate tomorrow following the publication of US New Home Sales figures.