Graphic Rewind: US Dollar Rallies Amid Quiet Market Conditions

2 Hr USDollar GMT MarketScope Chart, Created by Adrian Robles

The Dow Jones FXCM US Dollar Index (Ticker:USDollar) rose roughly 75 points on extremely quiet market conditions. The USD began its climb this week on better than expect retail sales data, an indicator of a healthy consumer economy. Though it is important to keeping in mind that retail sales may have just rebounded off of the 0.7% drop seen in June. The next major move in the US Dollar came on the announcement that US inflation is at 1.4%, a 0.2% drop from last month. Typically lower inflation raises the value of a currency, but the downward move may have been the result of QE3 speculators looking for signs of deflation. The US Dollar Index corrected one last time during the week on negative US economic data, among which was higher than expected initial jobless claims. High initial jobless claims may point to higher unemployment, and add to the speculation of QE3. The USD rallied during the last 24 hour of trading, popping on better than expected consumer confidence data.

It is uncertain whether volatility will pick up next week and drive investors to seek a safe haven currency like the US Dollar, or if risk appetite will pick up and with it demand for riskier assets. In the week ahead of us, with regards to the US Dollar, traders will be watching for the release of the FOMC minutes on Wednesday, and the meeting between Greek Prime Minister Samaras and German Chancellor Merkel that is set to take place on Friday.