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US dollar takes a breather following another big move up

US dollar daily update

BY DEB SHAW | 

US dollar daily update

The US dollar is slightly lower against all major currencies except the Australian dollar and the Canadian dollar today. Yesterday, the dollar moved up sharply following the European Central Bank's interest rate decision and press conference. While expectations were running high for the ECB to suggest a timeline for ending its asset buying program, the Bank failed to clearly outline forward guidance. While US Treasury yields fell yesterday (10-year Treasury yields are now back below 3%), the dollar managed to strengthen nonetheless. 

Turning to recent news and data, initial jobless claims have fallen to lows last seen in 1969. Thanks to accelerating US economic growth, the job market is looking particularly healthy. While jobs are a lagging indicator, the data suggests that the US economy remains strong. In other data, durable goods orders suggested that businesses have cut back on big-ticket capital spending. As durable goods is a forward-looking indicator, the relatively weak figures suggest that businesses are turning more cautious. While the US economy is unlikely to grow at its 2017 pace, the outlook for this quarter remains benign. Our short-term outlook on the US dollar is bullish, while our medium-term outlook remains neutral.  

USD/JPY is down slightly today and currently trading above 109.20. EUR/USD is flat and trading above 1.210. The pound is flat, and GBP/USD is currently above 1.3920.

Looking at economic data and events from the US this week, traders will be paying close attention to upcoming Q1 2018 GDP growth figures. The Chicago Fed national activity index for March (0.1 vs. 0.27 expected) was below expectations. Existing home sales for March (5.6m vs. 5.5m expected), Markit services PMIs (54.4 vs. 54 expected), and manufacturing PMIs (56.5 vs. 55 expected) were ahead of expectations. S&P/Case-Shiller home prices for February (6.8% vs. 6.3% expected) and March MoM new home sales (4% vs 1.9% expected) were both ahead of expectations. Weekly initial jobless claims (209k vs. 230k expected) were above expectations, while durable goods (ex Transportation) for March (0% vs. 0.5% expected) were below expectations. Later today, the most important day, we’ll see Q1 GDP growth and Q1 personal consumption expenditures. We’ll also see the Michigan consumer sentiment index for April. Last week, the Fed’s Beige Book suggested that growth continues to accelerate at a moderate pace.

Updated 
Outlook
Bullish

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