Global risk sentiment and counter currency themes dominated USD price action until a Friday sell off locked the Greenback as the big loser of the week!
Major Market Drivers for the U.S. Dollar
Global risk sentiment flows seemed to be the driving theme for most of the major currencies this week, which included the Greenback as its behavior appear more as a safe haven asset than as a proxy for U.S. strength or weakness.
This was apparent at the beginning of the week as global risk sentiment was lower, likely a combination of news that the Chinese economy grew at its slowest pace since 1990, the U.S. canceling its trade planning meeting with China, and possibly the ongoing U.S. partial government shutdown. During this period and throughout the week we can see that the U.S. dollar performance against the Loonie and Aussie was better than its performance against the Japanese yen and Swiss franc. The Kiwi and Sterling were outliers due to their own individual situations the brought on buyers throughout the week.
And we can see individual moments during the week where the Greenback actually fell on net positive U.S. data releases (U.S. house prices rise, record low weekly jobless claims, and manufacturing PMI ticks higher), signaling again that it was treated more as a safe haven asset.
One bit of USD price action worth pointing out was on Friday where the Greenback fell uniformly against the majors during the London-U.S. trading session. It’s likely due to the return of risk-on sentiment at the end of the week (possibly due to positive U.S. tech earnings and a temporary end to the partial U.S. government shutdown), but an argument can also be made that it was due to rising speculation that the Federal Reserve would end its balance sheet reduction program, which was probably ignited by an article in the Wall Street Journal early Friday morning.
United States Headlines and Economic data
- US cancels trade planning meeting with China, source says
- FHFA House Price Index Up 0.4% in November
- Richmond Fed: Manufacturing ‘soft’ in Jan.; backlog of orders lowest since 2009
- Commerce Secretary Wilbur Ross: The US is ‘miles and miles’ from a trade deal with China
- U.S. weekly jobless claims lowest since 1969
- US Flash PMI at 54.9 vs. 53.8 in December
- The Fed may be moving closer to ending its rally-killing balance sheet reduction
- Backing down, Trump agrees to end shutdown without border wall money