The US dollar is slightly higher against all major currencies today. The dollar is currently the strongest against the Australian dollar and the Japanese yen. Yesterday, trading in the currency was fairly choppy as the dollar initially weakened after China retaliated against the Trump's administrations tariff announcements. Later in the day, the dollar made up some of its losses after Director of the National Economic Council Larry Kudlow, a White House official, suggested that the US tariffs were only "first proposals". When asked whether or not the US and China are in a trade war, Kudlow said "absolutely not".
Kudlow's appearance and comments on Fox Business Network (a TV channel) helped calm the market's fears. While the S&P 500 Index started the day with significant losses, it managed to rise into positive territory by the end of the day. Markets were also helped by better-than-expected ADP jobs numbers. Looking at currency markets, "risk-on" pairs (such as USD/JPY and AUD/USD), traded in a similar fashion. While Kudlow may have supported the market in the short-term, our overall stance on risk sentiment remains the same. As global growth and inflation data decelerates, we expect riskier investments to underperform this year relative to last year. While the dollar remains in a bearish trend, this is usually good news for the buck. 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 106.90. EUR/USD is down slightly and trading above 1.2270. The pound is down slightly, and GBP/USD is currently above 1.4060.
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. FOMC member Kashkari said that not many hikes were needed, while the Fed was not focused on volatility in the stock market. Markit services (54 vs. 54.3 expected) PMIs, factory orders for February (-1.2% vs. 1.7% expected), and ISM non-manufacturing figures (58.8 vs. 59 expected) for March missed expectations. Markit composite PMIs (54.2 vs. 54.1 expected), as well as ADP employment changes for March (241k vs 205k expected) were ahead of expectations. FOMC member Mester did not address monetary policy or foreign exchange rates. Later toay, 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 hear comments from Fed Chair Jerome Powell. Lastly, we’ll see changes in consumer credit. Last week, Q4 GDP growth (2.9%) beat expectations.