Upbeat US data lifts dollar, supports case for rate hike

The Federal Reserve will likely breathe a sigh of relief after a series of upbeat US economic data on Tuesday. Over the past two weeks economic data began to improve. Just last Friday, Fed Chair Janet Yellen signaled that a rate hike is still in the cards for 2015. The dollar rallied on the news. On the same day, encouraging US inflation data lifted the greenback.

On Tuesday, the dollar surged to a new eight-year high versus the yen as data showed US durable goods orders came in line with expectations at -0.5% in April. Excluding transportation, durable goods orders jumped 0.5%, beating forecasts for a 0.3% rise. Other upbeat data followed. The pace of new home sales in April rose by a better-than-expected 6.8% while US consumer confidence data was positive after a jump to 95.4 in May, above expectations.

At its core, the foundation of the dollar rally is that US growth is accelerating and every data point matters to Fed.

USD/JPY consolidated gains during the Asian session on Wednesday after rallying to a fresh eight-year high of 123.33 after the us data on Tuesday.

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