The Greenback found itself at one of the top spots last week. Will this week’s catalysts extend its uptrends?
Here are potential catalysts:
FOMC member speeches
Will FOMC members double up on their hawkishness or insert a bit of caution in their speeches?
If you recall, Fed members upgraded their economic forecasts and projected a faster pace of tightening within this year and the next in their statement printed last week.
Voting member Raphael Bostic is first to step on stage as he takes audience questions in Savannah today at 5:00 pm GMT, while San Francisco Fed President John Williams is also expected to speak in New York at 8:00 pm GMT.
Fed Governor Powell himself could make a wage or two when he participates in a panel discussion in Portugal on June 20 at 1:30 pm GMT. Watch out for remarks over global trade concerns, as well as any cautious remarks despite the Fed’s plans to tighten its policies faster than its earlier plans.
Global trade updates
As you can see below, trade-related updates dominated the dollar’s price action late last week. And while the bulls and bears have yet to cause one-directional move for the dollar, a lack of other catalysts might make global trade tensions a major market mover for the Greenback and other major currencies.
This week pay close attention to how the U.S. and China react to each other’s growing pile of additional tariffs.
While trade tensions between the world’s largest economies is bad enough for smaller economies that depend on U.S. and Chinese demand, analysts are also worried that the aggressiveness could spill over to their trading partners and inspire a global trade war where nobody wins. Keep your eyes glued to the tube, aight?
Last Week’s Price Review
The Greenback is the one currency to rule them all this week (as of 5:00 pm GMT). No other currency even comes close. This week’s win will also put an end to two straight weeks of Greenback weakness.
And while the FOMC statement was the top event for the Greenback, it was actually the ECB statement that gave the Greenback wings. Well, that and the stronger-than-expected U.S. retail sales report.
The Greenback started the trading week on a mixed footing but buyers were ever-present, so much so that the Greenback was clearly tilting to the upside by Tuesday, likely because of preemptive positioning and/or short covering ahead of the FOMC statement.
The Greenback’s rally finally fizzled when Politico released a report that claimed that Trump is supposedly “expected to impose tariffs on Chinese goods as soon as Friday or next week.”
This is a bit of a surprise since the U.S. is expected to only print a final list of Chinese goods that will be subject to tariffs on Friday, but the U.S. didn’t say if the tariffs will be imposed immediately.
Moving on, the Greenback then continued to slide after that, likely because traders were also taking some profits off the table ahead of the FOMC statement.
And when the FOMC statement finally rolled around, the Greenback tried to charge higher when the Fed announced a rate hike while also upgrading the projected path for the Fed Funds Rate to show two more hikes this year.
The would-be rally was quickly faded, however, likely because of continued profit-taking by those who opened preemptive positions. Some market analysts had a similar opinion, although they cited profit-taking ahead of the ECB statement.
Aside from profit-taking, it’s also possible that the Greenback was hit by selling pressure because of a the Wall Street Journal report that basically repeated the claims of the earlier Politico report.
At any rate, the Greenback continued to weaken against its peers (except the Aussie) before regaining its mojo because of the ECB statement.
And as noted in Thursday’s London session recap, the Greenback very likely benefited from the ECB statement because it was feeding off the euro’s weakness as monetary policy divergence and interest rate differentials came into play, given that the Fed hiked the day before (and signaled more hikes to come), while the ECB said that interest rates ain’t moving anytime for some time.
Also if the ECB does hike rates, it would come at a later-than-expected date since the ECB explicitly stated that rates ain’t moving “at least through the summer of 2019,” which means that the ECB won’t consider hiking until the October 2019. And as noted in the Euro’s Weekly Recap, the market has already priced in a June 2019 rate hike.
Getting back on topic, the Greenback also likely got an extra boost when the May U.S. Retail Sales report surprised to the upside shortly after the ECB statement.
Sellers eventually returned during Friday’s morning London session. And as noted in Friday’s London session recap, the Greenback’s slide was apparently triggered by a Reuters report that claimed that the U.S. is supposedly preparing another list of tariffs on Chinese goods to the tune of $100 billion, which is separate from the one Trump is expected to reveal during the U.S. session.
And when the U.S. session rolled around, Trump announced $50 billion worth of tariffs on Chinese goods, with more on the way if China retaliates. That didn’t stop China from threatening to retaliate in kind shortly after Trump’s announcement, though, and caused the Greenback to wobble a bit.
The Greenback’s price action then became mixed after that, however, since the Greenback began to trade sideways against everything except the comdolls. In fact, the Greenback even began to trade higher against the comdolls as commodity prices cratered because of Trump’s announcement.