U.S. Economy is Showing Improvement -- U.S. Dollar Strong in Forex Trading

The U.S. economy is showing improvement, and that is providing a backdrop for a strong dollar in forex trading. Indeed, reports from the Fed's Beige Book show that 75% of the Fed districts are showing improvement. But enthusiasm is being held in check.

GFT's Kathy Lien describes what is helping -- and hindering -- economic recovery in FX360:

Consumer spending and manufacturing is leading the recovery but the labor market and commercial real estate remain problems areas. Some growth potential may have been held back by the intense snowstorms that shut down many businesses during the month of February which is good because it means that activity could snap back in the coming month. Inflation pressures remain modest at best which poses some threat to the chances of a rate hike in the third quarter.

Normally, improvements to the U.S. economy would signal a rise in equities and high beta currencies, but that it is not happening right now. For now, the sterling and euro struggle in forex trading.

The euro zone is being hit by the Greek crisis, and the pound is affected by Britain's economic issues -- including the fact that there are worries about U.K. public debt. As a result, the U.S. dollar, which is backed by an economy that is improving at a better rate, maintains the upper hand.