The US dollar is slightly lower today after strengthening yesterday. Looking at the currency against its major peers, the dollar is currently the weakest against the euro and the Australian dollar. Yesterday, US stock markets rebounded, while Asian stock markets are rising this morning. USD/JPY, a key barometer for risk appetite, also bounced back yesterday. Following fears of a trade war after President Trump's tweets, risk appetite appears to be growing. If current trends continue, the dollar should continue depreciating relative to currencies such as the euro and commodity currencies such as the Australian dollar. Turning to economic data, Markit composite PMIs and ISM non-manufacturing PMIs both beat expectations. The figures suggest that US economic growth is likely to continue accelerating in the foreseeable future. European and Asian PMIs, on the other hand, have recently come in below estimates. As we have written before, the US has the strongest economic outlook today. Our short-term outlook on the dollar is neutral, while our medium-term outlook remains bearish.
USD/JPY is flat today and currently trading above 106.10. EUR/USD is up slightly and trading above 1.2340. The pound is flat, and GBP/USD is currently above 1.3830.
Turning to US economic data this week, markets will be focused on PMIs and non-farm payrolls. Markit composite PMIs (55.8 vs. 55.5 expected) and ISM non-manufacturing PMIs (59.5 vs. 59 expected) both beat expectations. Fed Vice Chair Randal Quarles called for easing banking regulations (specifically: "material changes" to the Obama-era Volcker Rule). Later today, we'll see factory orders. We'll also hear speeches from the Fed's William Dudley and Lael Brainard. On Wednesday, we'll get ADP employment changes, the trade balance, consumer credit, and nonfarm productivity. We'll also hear speeches from Fed members including Kaplan, Bostic and Dudley. On Thursday, we'll see initial jobless claims. On Friday, the most important day, we'll see nonfarm payrolls numbers, hourly earnings and the participation rate. Last week, Core PCE figures came within expectations.