espite a bit of a retracement, the dollar remains on course for its best week in six months in trade-weighted terms as investors pile into the currency due to its safe-haven status. Whether or not this recovery rally in the greenback can be maintained may depend a lot if authorities in the Euro Area can get the second wave of infections under control. The US government’s ability to force through more economic stimulus before November’s presidential election may also prove key. There was slightly more upbeat news on that front yesterday, with Treasury Secretary Mnuchin saying that he would resume talks with House Speaker Nancy Pelosi regarding another relief package.

Attention this week has been heavily on central bank speakers. FOMC chair Powell spoke again during his testimony to Congress on Thursday, although his remarks were very similar to previous communications as he called on the US government to further support the economy. The most noteworthy comments probably came from Fed member Bullard, who noted that he thought the US economy may make a full recovery by the end of 2020. This is a highly optimistic appraisal not shared by the majority of his peers, so the dollar took little notice.

Meanwhile, US housing data out on Thursday was highly encouraging, pointing to robust levels of demand within the sector. Sales jumped by another 4.8% in August, with more than one million new homes purchased last month (Figure 1) – the most in a single month since 2006. This probably has much to do with record low borrowing rates. A similarly impressive reading from this afternoon’s durable goods order data would be another positive sign and could provide impetus for another move higher in the dollar.

Figure 1: US Home Sales (2005 – 2020)