Weak data and positive risk sentiment sank the dollar last week. Can this week’s catalysts push it back up?
Here are potential catalysts you should watch out for:
Durable goods orders (Oct 24, 12:30 pm GMT)
Orders for long-term manufactured goods edged 0.2% higher in August, which is better than the 2.0% increase seen in July and better than the 1.0% decline that market players had expected.
The core figure, which excludes volatile items such as transportation goods, jumped 0.5% after falling by the same rate in July.
Higher orders for long-lasting goods is usually a good thing as it suggests business confidence. However, details hinted that the boost was mostly due to Pentagon-led demand. Orders for non-defense capital goods, which is a proxy for business spending, actually slipped by 0.2% for the month.
The weak details, combined with an unfavorable update on the U.S.-China trade negotiation, dragged the dollar lower against its peers.
This week analysts expect the headline durable goods orders to decline by 0.8%. Ditto for the core figure, which is expected to weaken by 0.3% in September.
Take note that Uncle Sam will also print a bunch of lower-tier reports at the durable goods report release. Not only that, but the European Central Bank (ECB) will also share its policy decision around the same time.
That means that, unless we see significant hits or miss in the report, then it’s likely that the dollar’s reaction to it will be overpowered by other market themes.
The U.S. won’t be printing a lot of top-tier reports over the next couple of days, so this week’s PMI releases could get more attention than the usual.
Richmond’s manufacturing index (Oct 22, 2:00 pm GMT), which came in at -9 in September, is expected to reflect worse conditions with an index reading of -14.
Markit’s manufacturing PMI (Oct. 24, 1:45 pm GMT), which clocked in at 51.1 in September, could dip down to 50.7 in October. And then there’s Markit’s services PMI, which could come in at 51.0 after printing at 50.9 in September.
Market risk sentiment
We saw from last week’s price action that overall risk appetite can dictate the dollar’s intraweek trends.
Brexit-related updates could make a dent on the dollar’s profits especially if Prime Minister Boris Johnson ends up with some form of agreement with EU lawmakers that could still dispel uncertainty even as BoJo asks for a three-month Brexit extension.
Global trade news could also take center stage this week. Chinese Vice-Premier Liu He is raising expectations that a U.S.-China trade deal could be reached as early as mid-November.
Meanwhile, additional tariffs on $7.5 billion worth of EU goods have taken effect last Friday. Aircraft from the region will now be charged an additional 10% tariff, while other products will sustain a whopping 25% additional charge. Yipes!
Missed last week’s price action? Read USD’s price recap for Oct. 14 – 18!