The Greenback started the week strong and maintained its lead across the board last week. Will the dollar extend its gains this week? Let’s take a look at potential catalysts.
CPI and retail sales reports (Feb 14, 1:30 pm GMT)
On Wednesday we’ll have a double special in the form of CPI AND retail sales reports from Uncle Sam.
Monthly CPI is expected to show 0.3% growth for the month of January, which is faster than the 0.1% uptick seen in December. However, core CPI is expected to slow down from 0.3% to 0.2%.
Meanwhile, market geeks estimate that retail sales grew by 0.5% after rising by 0.4% in December. No such luck for core retail sales, which is expected to slow down from 0.4% to 0.2% for the month.
If you’re planning on trading the releases, you should know that the reports posted mixed results last month. And while the headlines misses caused a few bad moments for the Greenback bears, market players eventually took in the generally positive results and the selloff failed to find traction.
Lower-tier economic reports
Following Wednesday’s top-tier report fiesta is a slew of lower-tier reports scheduled on Thursday.
At 1:30 pm GMT we’ll see the monthly PPI report, which is expected to show 0.4% growth after a 0.1% decline in December. Ditto for the core PPI numbers, which is expected at 0.2% after December’s 0.1% downtick.
Around the same time we’ll see New York’s manufacturing index (18.2 expected, 17.7 previous), Philly Fed manufacturing index (22.1 expected, 22.2 previous), and initial jobless claims (229K expected, 221K previous).
Then, at 2:15 pm GMT we’ll see the industrial production (0.2% expected, 0.9% previous) and the capacity utilization rate (78.1% expected vs. 77.9% previous) releases.
The last batch for the day will come in at 3:00 pm GMT with the NAHB housing market index and the 9:00 pm GMT TIC long-term purchases report.
If you still haven’t gotten enough of day trading by then, then you might want to trade the building permits, housing starts, and import prices scheduled on Friday at 1:30 pm GMT followed by the preliminary UoM consumer sentiment and inflation expectations reports.
While these lower-tier reports might not affect the dollar’s price action for long, they might tip overall risk (and dollar) sentiment during the U.S. sessions. Doesn’t hurt to stick around during the releases, right?
Last Week’s Price Review
The Greenback’s losing streak finally ended last week. And the Greenback only added to those gains this week since the Greenback is currently the second best-performing currency after the yen (as of 6pm GMT).
As you can see in the overlay of USD pairs above, the Greenback started the trading week on a strong footing against everything except the yen.
The Greenback’s price action then became a mixed mess on Tuesday before getting a second bullish wind on Wednesday.
After that, price action on the Greenback became a chaotic mess again. The Greenback was able to preserve its gains from Monday and Wednesday, though, so the Greenback is currently on the winning side.
As for catalysts, there weren’t really any for the Greenback’s rise on Monday. Sure, ISM’s non-manufacturing PMI jumped from 55.9 to 59.9 in January, which is the strongest reading since August 2005.
However, the Greenback was already on the move before the PMI report was released. Although it’s very likely that the better-than-expected PMI reading helped to sustain the Greenback’s rally until early Tuesday.
Anyhow, some market analysts think that the Greenback’s pre-PMI report rise was just due to the perception that the Greenback’s slide is overdone, which prompted short-covering by traders who shorted during the Greenback’s losing streak.
Other market analysts, meanwhile, pointed to safe-haven demand for the Greenback because of the intense risk aversion on Monday.
As for the Greenback’s broad-based rise on Wednesday, there are also no clear catalysts for that as well.
Risk sentiment improved on Wednesday, so market analysts couldn’t really link the Greenback’s rise to safe-haven demand like some of them did on Monday.
Instead, market analysts chose to attribute the Greenback’s broad-based rise on the euro’s broad-based fall, so bearish pressure on EUR/USD supposedly applied enough bullish pressure on the Greenback to give other USD pairs a lift as traders abandoned the euro in favor of the Greenback.
Oh, there were also some drama related to the U.S. government shutdown. But those didn’t really have a noticeable impact on the Greenback’s price action.
Also, the U.S. government really did briefly shut down. However, Trump already signed a bill into law earlier to end the shutdown. But again all that drama didn’t really have a noticeable impact on the Greenback’s price action.