The week promises to be another interesting one for the dollar with Uncle Sam printing PMIs and Fed Chairman Powell himself scheduled to make testimonies.
More from FOMC members
As if last week’s hullaballoo isn’t enough, Fed Chairman Powell and voting member Randal Quarles will share their two cents this week.
As noted below, clear hawkishness and hints of near-term action have spurred on the bulls after the FOMC statement was released.
For newbies out there, know that markets expect Powell to be a somewhat more hawkish (but still cautious) version of Yellen, while Quarles has been voting with the majority since his appointment in November.
Here’s their schedule:
- Feb 26, 8:15 pm GMT – Randal Quarles to give a speech at a conference in DC
- Feb 27, 1:30 pm GMT – Fed Chair Powell to testify before the House Financial Services Committee in DC
- Mar 1, 3:00 pm GMT – Fed Chair Powell to testify before the Senate Banking Committee in DC
Preliminary GDP (Feb 28, 1:30 pm GMT)
A downside surprise in the advanced reading extended the dollar’s downtrend last month, so y’all better believe that analysts are watching the second reading!
This time around market players are expecting a 2.5% growth in Q4 2017, which is a further downgrade from its 2.6% advanced reading rate. If it DOES get revised lower or even misses expectations again, then we might see the dollar dip against its major counterparts.
ISM manufacturing PMI (Mar 1, 3:00 pm GMT)
There are other PMI reports scheduled for release throughout the week, but the one you’ll want to watch out for is the ISM manufacturing PMI.
If you’ve seen one of Forex Gump’s NFP previews, then you’ll know that the employment component of the ISM PMIs can be used as leading indicators for NFP releases. Of course, any significant hits or misses for the headline reading could also cause intraday ruckus on the dollar’s price action.
Last Week’s Price Review
The Greenback is currently on track to claiming the top spot this week (as of 6:00 pm GMT), which is a major recovery after last week’s beat-down.
The Greenback strengthened right from the get-go, even though there were no direct catalysts and U.S. markets were closed for the President Day holiday on Monday.
And market analysts say that the Greenback strengthened on Monday because the Greenback supposedly plunged too hard, too fast last week, which enticed bargain hunters to come out of the woodworks and bid up the oversold buck.
The Greenback continued to strengthen on Tuesday. There were still no major catalysts, and aside from bargain-hunting, market analysts also added the possibility of profit-taking by Greenback shorts ahead of Wednesday’s FOMC minutes.
And when Wednesday rolled around, the Greenback’s rally extended for yet another round before plunging as a knee-jerk reaction when the FOMC minutes were released.
Buyers were lying in wait, however, and pushed the Greenback back up, since the minutes were interpreted by market analysts as being more hawkish overall, thanks to optimistic bits that hinted at near-term action like the ones below:
“Most members noted that recent information on inflation along with prospects for a continued solid pace of economic activity provided support for the view that inflation on a 12-month basis would likely move up in 2018 and stabilize around the Committee’s 2 percent objective over the medium term.”
“Members agreed that the strengthening in the near-term economic outlook increased the likelihood that a gradual upward trajectory of the federal funds rate would be appropriate.”
The Greenback’s post-FOMC strength only lasted for a few hours, however, since most USD pairs were beginning to encounter selling pressure by the time Thursday’s Asian session came.
There were no negative catalysts, so market analysts just shrugged and attributed the Greenback’s slide on profit-taking by USD bulls and falling U.S. bond yields.
However, the Greenback got a second wind late on Thursday that allowed it to bounce higher on many pairs. U.S. bond yields were still in decline, though, so market analysts couldn’t really pin the Greenback’s strength on bond yields, like some market analysts did on Thursday.
Instead, market analysts adopted a new narrative that investors are supposedly becoming wary of being too bearish on the Greenback because of the hawkish FOMC minutes and ahead of new Fed Boss Jerome Powell’s testimony before the U.S. Congress on Tuesday next week.
If true, then next week looks like another interesting one for the Greenback, assuming Powell sparks some fireworks.