Counter currency weakness and global risk aversion sentiment were likely the main reasons traders went bullish on the Greenback this week.
United States Headlines and Economic data
- Donald Trump asks China to abolish tariffs on US farm produce
- Markets Shrug Off Trump’s Attempt to Talk the Dollar Down
- Fed’s Rosengren Suggests Rate Pause May Last ‘Several Meetings’
- Fed’s Kashkari says wages show labor market still has slack
- US new home sales hit 7-month high, services sector rebounds
- U.S. nonfarm private sector employment +183K – ADP
- Fed’s Beige Book report finds ‘slight’ growth in many regions as government shutdown depressed activity
- US trade deficit surges to 10-year high in Dec. vs est of $57.3B
- Fed’s Williams: ‘New normal’ of slow growth will keep central bank patient
- 2019 February Job Cuts: U.S. Employers Announced 76,835 in February
- U.S. Consumer Debt Rose in January on Credit-Card Borrowing
- Job creation grinds to a near-halt in February; wages still on the rise
- Fed’s Powell says no immediate policy responses needed to economy
Major Market Drivers for the U.S. Dollar
The Greenback was generally in an upswing this week, mainly on a combination of counter currency flows and global risk sentiment. U.S. economic data and headlines were likely a factor, but since it was mixed, it looks like the reactions to the data were more short-term than influencing the general trend higher.
For example, we saw weak updates on construction spending, ADP Non-farm employment, U.S. trade balance, and the government’s update on the employment situation, all sparking short-term bearish reactions that can be observed in the one hour overlay chart above of USD pairs. And vice versa, the positive ISM services and new home sales data did seem to draw in a bullish reaction in USD pairs on Tuesday, but again on a short-term basis.
So, what had the Greenback generally trending higher on the week? We believe it was mainly counter currency catalysts, which were pretty bearish in most cases. The Loonie suffered after a dovish turn from the Bank of Canada monetary policy statement, and the Aussie ate some punches after a weak Australia GDP read and weak Chinese data updates. The euro and Swiss franc took its hits after we got more stimulus from the ECB (the likely reason for the strong USD rally on Thursday), and Sterling saw pressure off of another round of failed Brexit negotiations.
Overall, these events and reactions weren’t only negative for each individual currency, but they did return focus to the slowing global growth and trade story that has been brewing for a couple of months. With a return to macro fundamentals, the markets were spooked off of these recent updates which is likely the reason we saw “safe haven” assets rally higher on the week like U.S. bonds, the Japanese yen, and of course, the U.S. dollar. Although, the U.S. dollar did suffer damage going into the weekly close thanks to the dismal update to the U.S. employment report, the Greenback was a net winner on the week, only losing out to the Japanese yen and New Zealand dollar.