The dollar index remained poised to add gains for a ninth consecutive week as macroeconomic data released today strengthened the case for the Fed to tighten monetary policy. US retail sales in August increased in line with expectations, adding 0.6% m/m while the import price index fell by less than anticipated as prices declined by 0.9% m/m against expectations of a 1% m/m decline in August. A better than expected University of Michigan confidence index for September, which increased to 84.6 against expectations of 83.3 prompted investors to take further positions in the USD ahead of next week’s FOMC meeting. The encouraging data has many investors convinced that the Fed will imminently announce a shift towards higher interest rates and with the dollar index rallying to a fifteen month high earlier this week, on its best run of form for seventeen years, we could see further moves higher in the run up to next week’s Fed meeting.
Spot gold prices traded lower for the third straight session today, losing 1.1% at the time of writing as steady selling pressure dominated from the open. Prices have shed almost 5% since the start of the month as investors speculate on US monetary tightening and with prices trading below $1,230/oz towards the end of the European session we could see further selling pressure at the start of the coming week on any positive surprises in US macro data.
Sterling pared recent gains today, selling off towards 1.6205 mainly on dollar strength despite showing early signs of moves towards resistance at 1.6283. The pound managed to hold onto territory near yesterday’s opening levels as details of a second Scots poll indicated the No campaign had once again taken the lead. The ICM poll for the Guardian put the most recent figures at 51% for no against 49% for a yes to independence, confirming yesterday’s YouGov poll which suggested the pro-union movement had 52% against 48%. However, firm US data prevented any significant recovery in the pound and we expect gains on the upside to remain subdued ahead of next week’s vote.