So the Greenback didn’t get any support from the FOMC statement last week. Will this week’s catalysts provide reprieve for the battered currency? Here are the potential catalysts.
FOMC member speeches
Over the next couple of days we’ll hear from FOMC voting members Dudley, Mester, Quarles, and Bostic.
Remember that last week’s FOMC statement weighed on the dollar because the team stuck to its 3-rate-hike plan for 2018. While this week’s roster has a mix of hawks and doves in it, it would be interesting to see just how close these members are to considering a fourth rate hike this year.
Lower-tier U.S. reports
This ain’t no NFP week, but there are scheduled lower-tier reports that might tip the scale in favor/against the dollar’s intraweek trends.
The CB consumer confidence and Richmond’s manufacturing index will be printed tomorrow, followed by the final Q4 2017 GDP, good s trade balance, pending home sales, and crude oil inventories numbers on Wednesdays’ U.S. session trading.
Last but not the least are the core PCE price index, personal spending, Chicago PMI, revised UoM consumer sentiment, and the weekly initial jobless claims all scheduled on Thursday during the U.S. session. Watch these ones closely, will ya?
Trump’s administration and NAFTA and global trade updates
What’s a week without White House drama, amirite? Last week we saw just how sensitive the global markets are to the prospect of an all-out trade war between the world’s largest economies.
If Trump signals willingness to negotiate to get the deals he wants while avoiding a trade war, then we could see a bit of relief from the Greenback’s losses.
But if he still goes down the tough, protectionist road, then the blood in the (Wall) street will likely continue to flow and take the Greenback down with it.
Oh, and keep your eyes peeled for more of Trump’s advisors who will “always remain his friend” but still manage to get the boot this week!
Last Week’s Price Review
The Greenback got whupped and is currently (as of 5:00 pm GMT) the worst-performing currency of the week.
If you look at the overlay of USD pairs above, you can see that the Greenback was pushed below last week’s closing prices (dashed horizontal line) on Wednesday and additional selling pressure on Thursday prevented the Greenback from climbing back above last week’s closing prices.
And as marked on the chart, the main catalyst for the Greenback’s slide on Wednesday (and the first half of Thursday) was the FOMC statement.
Although it’s worth pointing out that the Greenback was already tilting to the downside in the runup to the FOMC statement, very likely because of profit-taking.
After all, market analysts claimed that the Greenback’s broad-based rise on Tuesday was due to preemptive positioning. Also, don’t forget that the Greenback was a net winner last week, thanks in part to preemptive positioning.
Going back to the FOMC Statement, the Fed actually delivered on a rate hike. However, that was widely expected, so forex traders had their sights on the Fed’s forward guidance.
And unfortunately for rate hike junkies, the Fed maintained its projection for three rate hikes this year, thereby crushing expectations for four rate hikes and pulling the rug from under the Greenback’s feet (figuratively speaking).
After that, follow-through selling persisted until the first half of Thursday before the Greenback finally got a chance to lick it wounds on most pair during the second half.
However, the Greenback began to encounter fresh sellers late into the U.S. session. This selling pressure persisted until Friday. And market analysts were quick to blame this selling pressure on fears of a trade war between China and the U.S.
And if we take that narrative and link price action to the available catalysts, then it looks like Trump’s announcement of his anti-China tariffs appears to be the trigger. Although that announcement apparently had a more adverse initial effect on the Aussie and the Kiwi.
Other than that, the Greenback also got kicked lower when Trump tweeted the following:
I am pleased to announce that, effective 4/9/18, @AmbJohnBolton will be my new National Security Advisor. I am very thankful for the service of General H.R. McMaster who has done an outstanding job & will always remain my friend. There will be an official contact handover on 4/9.
— Donald J. Trump (@realDonaldTrump) March 22, 2018