The Greenback took a beating across the board this week. Will it get knocked down again this week? Here are possible catalysts for its price action.
More dollar selloff?
Unlike last week, there are no top-tier reports scheduled for release over the next couple of days. This means that dollar bulls and bears will likely take cues from equities and bond prices (as it did early last week) or speeches of voting FOMC members Mester and Quarles.
Mester, a certified hawk, will give a speech on Wednesday at 9:30 PM GMT while Quarles – a Trump appointee – will give his two cents on Friday at 5:15 PM GMT.
If their speeches turn out to be a non-mover, though, then look for clues from the other central banks. The ECB, PBoC, and BOJ, in particular, sound like they’re about ready to tighten their policies, which could further reduce dollar demand.
If you’re into day trading U.S. economic releases, then you might want to know that New York’s manufacturing index will be printed on Monday, followed by the industrial production and Beige Book report on Wednesday, and building permits, housing starts, initial jobless claims, and Philadelphia’s manufacturing index on Thursday.
Last Week’s Price Review
The Greenback had another tough week this week and is the second worst-performing currency of the week (as of 6pm GMT).
The Greenback clearly had no chance against the yen. However, the Greenback actually had a promising start against most of its rivals, possibly because of the strong performance of U.S. equities and bonds.
However, the Greenback’s upward tilt got broken on Wednesday when rumors got around that China may slow or even halt its purchases of U.S. treasuries as a political move against Trump’s plans to clamp down on what Trump says are unfair Chinese trade practices.
There was no follow-through selling and the Greenback began to trade mostly sideways, though, likely because China later denied those rumors.
The Greenback’s suffering was not yet over, however, since the Greenback encountered broad-based selling pressure when U.S. PPI failed to meet expectations (-0.1% vs. +0.2% expected, +0.4% previous), which likely fueled speculation that the U.S. CPI report will disappoint and pushed the Greenback even lower.
And as it turns out, headline U.S. CPI did slow from +0.4% month-on-month to +0.1% and from 2.2% year-on-year to 2.1%. However, these are within expectations. On a more upbeat note, core CPI came in at +0.3% month-on-month, beating the consensus for a 0.2% rise. Year-on-year, this translates to a faster 1.8% increase (steady at +1.7% expected).
The retail sales report was released together with the CPI report. And while the headline value of retail sales failed to meet expectations, (+0.4% vs. +0.5% expected), the previous headline reading was upgraded from 0.8% to 0.9%. The core reading, meanwhile came in as expected (+0.4% as expected), but the previous reading was upgraded from +1.0% to +1.3%. The retail sales report was therefore mixed but positive overall.
And since both the CPI and retail sales report were mixed but positive overall, the Greenback jumped higher as a knee-jerk reaction, but failed to attract follow-through buyers.