2 Oct 2023

USD Strengthens on Positive Economic Data

The USD strengthened due to positive U.S. economic data and Federal Reserve optimism. Inflation exceeded expectations, oil prices rose, jobless claims were better than expected, and U.S. GDP growth confirmed stability. INR strengthened on eased U.S. Treasury yields and lower U.S. oil prices.

author dp
Team INRBonds
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USD Strength and Factors:

  • The U.S. dollar (USD) gained strength against major world currencies.
  • This was primarily attributed to positive U.S. economic data and optimistic comments from Federal Reserve officials.

Inflation Data:

  • The August Personal Consumption Expenditures Price Index, the Federal Reserve's preferred inflation indicator, outperformed expectations.
  • It showed an annual increase of 3.5% and a monthly increase of 0.4%.
  • The Core PCE, which excludes fuel and food prices, stood at 3.9% annually and 0.1% monthly.

Oil Price Movement:

  • Oil prices rose by 2% during the week.
  • This increase was driven by supply constraints in the U.S. and optimism regarding higher demand in China during its Golden Week holiday.

Jobless Claims Data:

  • U.S. jobless claims exceeded expectations, rising to 204,000 from the previous week's 202,000.
  • This figure was below the expected 215,000, indicating ongoing strength in the U.S. job market ahead of the upcoming nonfarm payroll report.

U.S. GDP Growth:

  • U.S. GDP data for the second quarter confirmed annualized growth of 2.1%.
  • This result aligned with expectations and represented a slight increase from the 2% growth in the previous quarter.

INR Performance:

  • The INR ended the week on a stronger note.
  • This was attributed to easing U.S. Treasury yields and a decline in U.S. crude oil prices from their yearly highs on Friday.

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