The dollar ended flat yesterday and continues to trade sideways this morning. The currency was gaining in the morning yesterday, but it fell in the latter half of the day. While the currency has been mixed, US bond yields have been very strong - suggesting rising expectations for future inflation and rate hikes. We have downgraded our short-term outlook on the dollar to neutral accordingly. Recent news regarding Trump's tax reforms have been mixed. Earlier reports suggested that key Republican senators including Paul, Collins and McCain were on board. However, Reuters is now reporting that Paul may vote against the measures given his objection to spending levels. Democrats are unlikely to support the current bill without significant concessions.
USD/JPY has been very strong and is now above 113. The pair is currently trading just below 113.10. EUR/USD is up this morning after rising yesterday, with the pair currently above 1.1810. The pound has enjoyed a weak rebound, with GBP/USD currently above 1.320.
This week is a relatively light week for the US dollar. Tuesday's industrial production figures (0.3%) met estimates while export (0.8%) and import prices (0.7%) beat expectations. On Wednesday, building permits (1.215m vs. 1.25m expected) and housing starts (1.127m vs. 1.175m expected) failed to meet expectations. The Fed’s Beige Book survey suggested a hawkish outlook, with interest rate hikes now looking more likely. Today, we’ll get initial and continuing jobless claims. Finally, on Friday we’ll see existing home sales. Last week, both CPI and retail sales missed expectations, driving down expectations of Q3 growth and inflation.