US dollar bounces back after mixed data

After the release of data that was both positive and negative for the US, the dollar strengthened.

Retail sales were not as good as anticipated, however, industrial production exceeded expectations.

Several Federal Reserve representatives voiced their approval of the American dollar.

In April, retail sales in the US increased by 0.4% compared to the previous month, which was two times lower than what was predicted. Core retail sales, not including auto sales, rose 0.4% month-on-month, meeting the anticipated figures.

In April, US industrial production unexpectedly rose by 0.5%, while no change was anticipated. Additionally, the housing market index from the NAHB was better than expected, increasing to 50 points in May from 45 points the previous month.

On Tuesday, Loretta Mester, President of the Cleveland Federal Reserve, stated that the rate has already been held, however, further evidence is required to demonstrate that inflation is decreasing. Inflation is still high, so "we must remain committed to our current course of action."

Thomas Barkin, President of the Richmond Federal Reserve, stated to Bloomberg on Tuesday that he would not be opposed to increasing rates if it was necessary to reduce inflation. Furthermore, he noted that he did not think a rate hike would be a danger to financial stability.

ING warns that EUR/USD must remain above 1.08 to prevent major losses. If it falls below this point, it will be a sign of a major decline in market sentiment. The bank also states that the risk of growth in safe-haven assets, like the dollar and the yen, is high if there is no progress on the public debt limit.

Rabobank expects that the dollar will remain in demand as a safe-haven asset. Furthermore, the bank believes that the Federal Reserve's interest rates will rise for a longer period of time than the market is currently anticipating.

HSBC believes that the current debate surrounding the US debt ceiling could lead to increased market volatility. Furthermore, the fear of a potential economic downturn could cause the US dollar, which is traditionally seen as a "safe haven" currency, to initially rise but then eventually fall.

Commerzbank has warned that the US dollar will be put under pressure if there is no resolution to the issue of the debt ceiling.

Danske Bank predicts that the EUR/USD will decline in the upcoming months, as the Federal Reserve maintains its rates until 2024. Furthermore, the outlook for the US economy appears to be less dismal.

Treasury Secretary Janet Yellen cautioned on Tuesday that a US default would cause an "unprecedented economic and financial storm" that could cause a revenue shock and result in a recession.

On Tuesday, President Biden is scheduled to meet with House Speaker Kevin McCarthy to discuss the debt ceiling. This meeting is expected to be of great importance.