Another week of diversified USD pair price action thanks to strong counter currencies influences and news stories, but the U.S. calendar was pretty busy with events of its own that did spark a few rounds of short-term action.
United States Headlines and Economic Data
- Fed’s Bostic Expects One Rate Rise This Year, Another in 2020
- Fed’s Clarida says U.S. economy in a good place
- Housing starts tumble to lowest level in more than 2 years
- Home prices in December rose at the slowest pace since August 2015: S&P Case-Shiller index
- Powell warns of slower growth, says the Fed is prepared to ‘adjust’ balance sheet unwind if needed
- The Conference Board Consumer Confidence Index increased in February to 131.4, up from 121.7 in January
- The U.S. international trade deficit was $79.5 billion in December, up $9.0 billion from $70.5 billion in November
- USTR to suspend China tariff hike ‘until further notice
- US jobless claims, continuing claims rise, suggesting a softening jobs market
- Chicago PMI surges in February as new orders jump
- U.S. Incomes Fell in January After Surge on Special Payouts
- Trump-Kim summit was cut short after North Korea demanded an end to sanctions
Major Market Drivers for the U.S. Dollar
Looking at the one hour chart above an overlay of USD pairs, uniform price action was few and far between on a short-term basis. This was likely due to a week of strong catalysts across the major currencies in which traders seemed to have given more weight than U.S. headlines and data for most of the week.
Asia region currencies (JPY, AUD, NZD) were likely driven lower on weak data coming from China (factory activity shrinks to 3-year low), Japan (industrial output falls 3.7% In January) and Australia (construction work digs a hole for the economy in fourth quarter). The Loonie tracked oil prices that moved on a slew of catalysts, including a Trump tweet at OPEC that spiked oil lower. And Sterling, the euro, and the franc saw relative buying support on a game changing positive Brexit development when May gave parliament the option to vote on a Brexit delay.
And that’s not to say that U.S. headlines and events were a dud for the dollar, we actually did see very short-term uniform moves off of U.S. based catalysts. On Tuesday, traders took the Greenback lower across the board during Federal Reserve Chair Powell’s testimony on the semiannual monetary policy report to the Senate. As with recent rhetoric, he notated that the economic outlook is “generally favorable,” but there are risks to economic growth and that the Fed will stay patient on monetary policy. To traders this means no further tightening at this time which tends to be USD bearish, as observed on Tuesday. U.S. housing data was also released during this period and a possible contributor to dollar weakness as housing starts and prices disappoint.
On Wednesday, there seemed to have been a mostly uniform bounce in dollar pairs, possibly on the big rebound in U.S. pending homes sales (+4.6% vs. -2.3% previous). This contradicted the previous day’s negative reads on the housing sector and possibly took focus away from the weaker-than-expected U.S. wholesale inventories, goods trade balance data, and factory orders data.
We saw a broad short-term bounce in USD pairs on Thursday after the initial estimate of U.S. fourth quarter 2018 GDP came in at 2.6%, better than the estimate of 2.2%. Despite being lower than the previous quarterly read of 3.4%, it was still a solid growth number showing strength in consumer and government spending, and a bounce in exports to +1.6% over the -4.9% decline in the previous quarter.
Finally, there was broad USD weakness during the morning U.S. trading session. This period included a heavy block of U.S. data, which included personal income and spending, the University of Michigan consumer sentiment survey, and the closely watched ISM manufacturing PMI survey. This batch of U.S. data actually came out weaker-than-expected, but the reaction was mixed among USD pairs so it’s likely the weakness before the news stemmed from traders anticipating the disappointing economic updates.