Rising bond yields, rate hike expectations, and fading trade war fears kept pushed the Greenback as one of the strongest performers last week. Will it go for two this week?
Advance GDP report (April 27, 12:30 pm GMT)
The only major report Uncle Sam will be printing is the first reading of its GDP report. Analysts believe that the economy had grown by 2.0% in Q1 2017 after clocking in a 2.9% uptick in Q4 2017.
If the last advance release was any indication, the markets could react to the headline numbers, but soon pay closer attention to the details. Make sure you do, too!
The Trump effect
Unless you’ve been too busy celebrating Kanye West’s return to Twitter, then you’ll know that the dollar (and all other currencies, actually) can be pushed around by headlines (read: Trump’s tweets) related to geopolitical conflicts, the dollar’s value, and the possibility of a trade war.
This week all eyes will be on the POTUS to see what kind of headlines he makes next. If he pushes for his protectionist plans, then we might see the dollar lose some of its gains from the previous week.
But if he continues to build bridges like he’s doing with his potential BFF Kim Jong Un, then we might see more of the optimism that pushed the dollar in the previous week.
Last Week’s Price Review
The Greenback is poised to be the one currency to rule them all this week (as of 5:00 pm GMT).
The Greenback initially had a bad run, though, despite the better-than-expected March retail sales report.
And some market analysts say this was supposedly due to easing fears that Trump’s missile strike in Syria will escalate into a bigger conflict, which increased appetite for higher-yielding assets at the expense of the Greenback.
A competing narrative is that the tweet below from Trump was supposedly a hint that Trump want the dollar to weaken as well.
Russia and China are playing the Currency Devaluation game as the U.S. keeps raising interest rates. Not acceptable!
— Donald J. Trump (@realDonaldTrump) April 16, 2018
In any case, selling pressure on the Greenback finally began to abate during Tuesday’s London session. There was no clear reason why, but some market analysts suggested that the Greenback was feeding off the weak euro and pound at the time.
Anyhow, catalysts finally emerged when the U.S. session rolled around. And as explained in Tuesday’s U.S. session recap, the buck’s recovery was likely sustained by the optimistic comments from some Fed officials and net positive mid-tier U.S. economic data.
After that, the Greenback just steadily climbed higher across the board without any clear, direct catalysts.
It was at this time that the narrative grew that rising U.S. bond yields, improving rate hike expectations, and fading trade war fears were supposedly lending strength to the Greenback. This narrative was then cited again on Thursday and yet again on Friday.