Ready for another busy week for the dollar? Here are catalysts that might affect the Greenback’s price action this week.
Trade balance (Jan. 8, 1:30 pm GMT)
Uncle Sam’s trade deficit widened to a 10-year high in October, which also marked the fifth consecutive month of increasing shortfall.
The disappointing release –printed in early December –piled on top of other worse-than-expected reports from the U.S. as well as concerns over the arrest of Huawei’s CFO. Not surprisingly, the dollar took hits on all sides at the time.
This week, traders expect to see the trade deficit narrow down to $54.0B in November. Significant hits or misses could cause deep retracements (if not reversals) for the dollar’s intraweek trends, so make sure you stick around during the release.
FOMC meeting minutes and member speeches (starting Jan. 9, 7:00 pm GMT)
As expected, the Fed raised its rates for a fourth time in 2018, bringing its rates up by 25 basis points to <2.50% in December.The central bank also dished out some downgrades including lower estimates for growth and inflation in 2018 and 2019. Even the Fed’s dot plot turned heads, as it only reflected two possible rate hikes in 2019 against earlier forecasts of three rate increases.
Governor Powell and his team generally showed their willingness to keep calm and carry on with their tightening plans, though the head honcho also hinted that the Fed will “monitor global economic and financial developments and assess their implications for economic outlook” and that “policy does not need to be accommodative.”
Powell doubled down on his “watching the markets” and “openness to other policy directions” biases when he said that in a panel interview last Friday that:
“With the muted inflation readings that we’ve seen, we will be patient as we watch to see how the economy evolves.”
and added that (emphasis mine):
“…we will be prepared to adjust policy quickly and flexibly and to use all of our tools to support the economy should that be appropriate to keep the expansion on track.”
This week we’ll know if other FOMC officials share Powell’s biases. Aside from the meeting minutes release, a bunch of other voting members like Evans (Jan. 9, 2:00 pm GMT and Jan. 10, 6:00 pm GMT), Rosengren (Jan. 9, 4:30 pm GMT), Bullard (Jan. 10, 5:40 pm GMT), and Clarida (Jan. 10, 10:30 pm GMT) will also share their two cents throughout the week.
Oh, and don’t forget that Powell himself will take the mic in a lunch in DC on Jan. 10 at 5:00 pm GMT!
CPI reports (Jan. 11, 1:40 pm GMT)
Annual U.S. inflation fell to from 2.5% to 2.2% in November, which marked the lowest reading since February 2018 but is within expectations. On a monthly basis, prices came in flat for the month.
Nothing fantastic happened to the dollar during the release, but that might not stop dollar playas from trading this week’s release.
Analysts are expecting the annualized rate to slow down to 1.9%, while the monthly reading might show a 0.1% decline in December.
Expectations don’t get much higher for the core figures, as core CPI is expected to show another 0.2% gain while the annualized version is also expected to maintain its 2.2% reading.
Other non-data catalysts
This week, the U.S. and China are having mid-level talks in Beijing. The sixth round of negotiations is spreading good vibes ahead of the 90-day trade truce deadline due in March.
Meanwhile, the U.S. government is on its third week of partial shutdown with no end in sight yet. Even Snoop Dogg is mad, yo!
Talks involving congressional staffers and led by Vice President Mike Pence over the weekend failed to make meaningful progress. Word around the hood is that the Donald might declare national emergency to build his wall if talks continue to stall.
Then again, the POTUS has shown some signs of compromising. He recently said that
“The barrier, or the wall, can be of steel instead of concrete, if that helps people…”
Analysts speculate that Trump might be compromising on the design so that the Dems could avoid calling it a “wall.” Hey, whatever works, right?