The US dollar is mostly flat today. The buck is weaker against the euro and commodity currencies (including AUD and CAD), while making gains versus the Japanese yen. Yesterday, the currency only made small gains despite a significant sell-off in riskier asset classes such as equities and commodities. As a safe haven, the dollar tends to strengthen when global risk sentiment turns fragile. One interesting phenomenon to note is that emerging market currencies (particularly those from Asian exporting countries) have been remarkably stable throughout the recent rout. As a result, the dollar has failed to break out so far.
Turning to recent news, White House economic adviser Peter Navarro told CNBC that President Trump remains committed to leveling the playing field between the US and China with regards to international trade. The recent rout in riskier assets has been exacerbated by fears of an escalating trade war. Beyond geopolitical concerns, investors are also becoming more wary of weaker economic data. Our short-term outlook on the dollar is neutral, while our medium-term outlook remains bearish.
USD/JPY is up slightly today and currently trading above 105.90. EUR/USD is up slightly and trading above 1.230. The pound is up slightly, and GBP/USD is currently above 1.4050.
Looking at US economic data this week, traders will be watching non-farm payrolls and sentiment data. Markit manufacturing PMIs (55.6 vs. 55.7 expected) and ISM manufacturing PMIs for March (59.3 vs. 60 expected) both missed expectations. On Wednesday, we’ll see Markit services and composite figures, as well as ISM non-manufacturing figures for March. We’ll also see ADP employment changes (March), factory orders (February) and hear a speech by FOMC member Mester. On Thursday, we’ll see the trade balance for February and see initial jobless claims. Friday is the most important day, and we’ll get non-farm payrolls and hourly earnings for March. We’ll also see changes in consumer credit. Last week, Q4 GDP growth (2.9%) beat expectations.