The US dollar is lower against most currencies today. Looking at the dollar against its major peers, it is currently the weakest against the Australian dollar, British pound and Japanese yen. After strengthening last week following FOMC minutes that suggested a brighter outlook for growth and inflation, the US dollar is reversing course today. Notably, US Treasury yields are also falling today, as fears of accelerating inflation recede. After peaking near 2.95%, 10-year US Treasuries are currently yielding 2.85%. Looking at the calendar for this week, new Federal Reserve Chair Jerome Powell will provide his first testimony to Congress. There are also a significant number of data releases this week including Core Personal Consumption Expenditures (the Fed's preferred measure of underlying inflation) and the second take of Q4 GDP growth. Given significant event risk, moves in the dollar are likely to be muted ahead of Powell's testimony later this week. Our short-term outlook on the dollar is neutral, while our medium-term outlook remains bearish.
USD/JPY is down today and currently trading above 106.40. EUR/USD is up and trading above 1.230. The pound is up, and GBP/USD is currently above 1.40.
Turning to US economic data this week, we’ll see GDP figures and Core Personal Consumption Expenditures. On Monday, we’ll get the Chicago Fed national activity index, Dallas Fed manufacturing index numbers and new home sales. St. Louis Fed President James Bullard (non-voter) will also be speaking. On Tuesday, Fed Chairman Jerome Powell will be speaking. We’ll also see durable goods and Case-Shiller home prices. On Wednesday, we’ll see the second take of Q4 GDP growth and Q4 Core Personal Consumption Expenditures. Powell will once again be speaking on Wednesday. We’ll also see Chicago PMIs and pending home sales. On Thursday, we’ll see January Core PCE figures, personal spending, initial jobless claims, construction spending, and Markit + ISM manufacturing PMIs. Last week, FOMC minutes suggested an improving outlook for growth and inflation.