The US dollar ended the day slightly higher yesterday and is flat this morning. Markets have been focused on the upcoming Senate tax vote and Powell's confirmation hearing scheduled for later today. With regards to the tax bill, the vote may be scheduled as early as Thursday if Senate Republicans can conclude their debates in time. So far, senators including Ron Johnson and Steve Daines are most likely to vote against the bill. According to a report by Politico, other senators at risk of voting 'no' include Bob Corker, Jeff Flake, Susan Collins and Jerry Moran. With regards to Powell's hearing, Reuters is reporting that the future Federal Reserve Chair is expected to defend the Fed's action during the crisis. Looking at current policy, he remarked: “We expect interest rates to rise somewhat further and the size of our balance sheet to gradually shrink”. Our medium-term outlook remains bearish.
USD/JPY is up slightly and currently trading just above 111.20. EUR/USD is also up slightly today and currently just above 1.1910. The pound is flat today, with GBP/USD currently above 1.3310.
This week, we'll see economic data relating to housing, inflation and economic survey figures. New Home Sales figures rose to 10-year highs on Monday (0.685m vs 0.625m expected). Later today, we'll get Case-Shiller Home Prices. On Wednesday, we'll see Q3 GDP and Core Personal Consumption Expenditures. We'll also see Pending Home Sales. On Thursday, we'll get all-important Core PCE figures. We'll also see personal spending, initial jobless claims and the Chicago PMI. Finally on Friday, we'll see ISM manufacturing PMI and prices paid. We'll also see Markit manufacturing PMIs. Last week, FOMC minutes worsened the inflation outlook.
As the dollar enjoys a small rebound, we are upgrading the US dollar to neutral. Note that the currency is trading within normal conditions in the short-term time frame. Our analysis is based on various technical indicators when looking at a daily chart of the US dollar index.
As the dollar falls on tax-related disappointment, we are downgrading the US dollar to bearish. The currency is neither overbought nor oversold today, and trades within a normal range. This is based on technical indicators when looking at a weekly chart.