The dollar’s price action was a mixed bag of nuts as NFP shenanigans got mixed in with geopolitical news. What catalysts can move the Greenback this week?
CPI report (March 13, 12:30 pm GMT)
Last month’s release told us that consumer prices had accelerated in January, with the core reading posting its fastest increase in a year. Details also tell us that it was the uptick in energy prices that overshadowed declines in other indices.
This week market players are expecting to see a 0.2% improvement after January’s 0.5% growth. Meanwhile, core CPI is expected to print at 0.2% after seeing 0.3% growth in the previous month.
A significantly better-than-expected report could re-ignite fears that the Fed would tighten its policies too quickly and stifle economic growth. On the other hand, a considerable miss might convince dollar bulls to unwind their four-rate-hikes-in-2018 trades.
Retail sales (March 14, 12:30 pm GMT)
In the February release we saw the dollar got dragged down when retail sales not only disappointed January expectations, but also saw downgrades for its December figures. In fact, it led some analysts to lower their GDP estimates for Q1!
This week analysts are expecting to see a 0.3% growth after January’s 0.3% decrease. Ditto for the core reading, which is also estimated to clock in at 0.3% after seeing flat growth in the previous month.
Remember that consumer spending makes up a huge chunk of Uncle Sam’s growth, so you can bet your Bitcoins that other players are also watching the release closely.
Last Week’s Price Review
The Greenback’s two-week winning streak will likely end this week since the Greenback is currently mixed for the week but a net loser (as of 6:00 pm GMT). The Greenback’s ranking could still worsen, though, since the Greenback only barely edged out the euro and the trading day ain’t over yet.
Looking at the overlay of USD pairs above, we can see that the Greenback’s price action was a bit messy, which indicates that the Greenback may have been vulnerable to opposing currency price action.
There were bouts of somewhat uniform price action, such as when the Greenback tanked against everything except the yen after word got around that North Korea is open to denuclearization talks.
The resignation of Gary Cohn, Trump’s economic adviser was a major event. However the overlay of USD pairs clearly shows that the Greenback only weakened against the safe-havens Swissy and yen and slightly against the lower-yielding euro, but gained ground against the Loonie and Aussie while barely budging against the pound and the Kiwi.
In other words, price action on USD pairs was clearly dominated by the opposing currencies.
Anyhow, another instance of uniform price action is when the Greenback moved broadly higher on Thursday.
There weren’t really any direct catalysts for the Greenback’s rise, but some market analysts tried to pin that on positive U.S. labor market data, namely the APD report. However, the Greenback barely reacted against the ADP report when it was released. And besides, the ADP report was released several hours before the Greenback started to rise.
In any case, the Greenback’s price action became mixed again after Trump officially announced that he was pushing through with his planned tariffs while granting exception to Canada and Mexico and opening the possibility of granting exemptions to other countries. Opposing currencies were therefore apparently dominating price action on USD pairs again.
Oh, the NFP report was released on Friday. The Greenback initially tried to jump higher likely because job growth exceeded expectations (+313K vs. +200K expected). However, follow-through selling prevailed on most USD pairs, very likely because wage growth failed to meet expectations (+0.1% vs. +0.2% expected).
Incidentally, the Greenback’s weakness on Friday, as well as the broad-based slide in the wake of positive news related to North Korea on Tuesday, contributed to the Greenback’s lackluster performance this week.