The US dollar is enjoying a big rebound today following recent weakness. The dollar is rising against all major currencies, and is currently the strongest against the British pound, the Australian dollar and the euro. The current USD rebound is somewhat out of sync with developments in other financial markets. Global equity futures (such as the S&P 500) are currently higher, while most commodities are also rising. As a safe haven currency, the dollar tends to strengthen during times of peril. Yesterday, the buck was broadly lower as hopes grew for a resolution to ongoing trade tensions. President Trump tweeted that trade talks are currently ongoing with numerous countries. He also expects a "happy" conclusion in the end.
Turning to news, the US scored its first victory thanks to ongoing trade negotiations. South Korea avoided tariffs by agreeing to voluntarily restricting its steel exports. The country also doubled the number of US vehicles that can be imported into the country. An increasing number of allied countries (including the EU, Australia and South Korea) have now been exempted from Trump's tariffs. Our short-term outlook on the dollar is neutral, while our medium-term outlook remains bearish.
USD/JPY is up today and currently trading above 105.90. EUR/USD is down sharply and trading above 1.2370. The pound is down sharply, and GBP/USD is currently above 1.4070.
Looking at US economic data this week, we'll see personal consumption expenditures and the second-take of Q4 GDP growth. The Chicago Fed national activity index (0.88 vs. 0.19 expected) beat expectations. FOMC member Mester stated that the threat of a trade war is a risk despite the sunny economic outlook. Later today, we'll get S&P/Case-Shiller home prices and hear speeches from the Fed's Quarles and Bostic. On Wednesday, we'll see the second-take of Q4 GDP growth and Q4 personal consumption expenditures. We'll also see February pending home sales and hear a speech from Bostic. Thursday is the most important day, and we'll see core personal consumption expenditures for February as well as initial job claims and Chicago PMIs. We'll also get a speech from the FOMC's Harker. Last week, Fed Chair Jerome Powell raised rates by 0.25% while suggesting that future policy will be determined based on incoming data.