The Fed’s meeting minutes is up this week! Will the doc and a couple of FOMC member speeches extend the dollar’s rally?
Preliminary GDP (Nov. 28, 1:30 pm GMT)
The advanced GDP release showed us that the economy had grown by an annualized rate of 3.5% in Q3 2018, faster than the 3.3% growth that analysts had expected.
Apparently, growth was driven by private spending and private investment while trade was a drag.
Traders weren’t impressed with the GDP release since the GDP price index and the PCE price index, the Fed’s preferred measure for inflation, missed analysts’ expectations.
This week market players expect to see the GDP revised a bit higher from 3.5% to 3.6%. We know that the headline numbers can take a backseat to inflation indicators, so make sure you read the whole report if you’re planning on trading the event!
FOMC speeches and meeting minutes
One reason why the dollar hasn’t risen more sharply than it did over the past couple of weeks was because traders were wary that the Fed might be taking a chill pill after raising its rates in December.
Not only that, but some FOMC members have hinted that the U.S. economy could actually slow down as early as 2019 or 2020!
This week we’ll find out more about what Fed members have to say. The FOMC meeting minutes, for example, will be published on Thursday at 7:00 pm GMT.
FOMC members such as Clarida, Bostic, and Chairman Powell himself will also be sharing their two cents over the next couple of days.
Hints that the Fed might pause its rate hikes or tone down their hawkish messages could mean more losses for the dollar. On the other hand, optimism from central bank members could help push the dollar higher across the board.
Last Week’s Price Review
The Greenback barely overpowered the yen and is currently the second top-performing currency of the week(as of 6:00 pm GMT), which is a reversal of fortune since the Greenback finished in second-to-last place last week.
The Greenback had a mixed start but began feeling broad-based selling pressure during Monday’s U.S. session. And the apparent catalysts is the NAHB housing market index dropping from 68 to 60, which is a bit odd since that is only mid-tier economic report at best, which is probably why some market analysts opted to blame the Greenback’s weakness on last week’s cautious comments from Dallas Fed President Robert Kaplan and Fed Vice Chair Richard Clarida.
In any case, the Greenback tumbled for a bit but began to encounter support come Tuesday, likely because of safe-haven demand due to the risk-off vibes at the time.
Demand for the Greenback then really ramped up when Tuesday’s U.S. session rolled around, so much so that the Greenback easily crushed all opposition. There were no apparent catalysts, but as noted in Tuesday’s U.S. session recap, the Greenback likely continued to attract safe-haven flows. Other market analysts were saying pretty much the same thing.
The Greenback’s rally began to lose steam come Wednesday, though, likely because of signs that risk aversion was improving.
The Greenback also got slapped lower when this rumor began to make the rounds.
🇺🇸 The Federal Reserve is starting to consider at least a pause to its gradual monetary tightening and could end its cycle of interest rate hikes as early as the spring, MNI reports, citing senior people at the #Fed they didn’t identify.
— Christophe Barraud🛢 (@C_Barraud) November 21, 2018
The Greenback’s price action eventually became more range-bound, though, and it wasn’t until Friday that the Greenback began busting the moves again, likely because of the returning risk-off vibes. Other market analysts shared the same opinion.
However, it’s also very likely that the Greenback was feeding off the euro’s weakness since the Greenback got a noticeable bullish boost (except against JPY) when the euro dropped because of the Euro Zone’s disappointing PMI reports.