The US dollar ended the day higher yesterday and is falling this morning. The dollar was helped by strong economic data including strong US consumer confidence and home prices. Markets were also relieved after the tax bill was passed by the Senate budget committee. This paves the way for a full Senate vote on the bill as early as this coming Thursday. In other news, the confirmation hearing for Jerome Powell (the next Federal Reserve Chair) contained few surprises. Powell reiterated his stance on reducing the size of the Fed's budget while raising rates gradually. Given the significance of the tax bill and upcoming inflation data (Core PCE), the dollar is likely to remain in a holding pattern until Thursday. Our short-term outlook remains neutral.
USD/JPY is flat and currently trading just above 111.50. EUR/USD is up slightly today and currently just above 1.18620. The pound is up today, with GBP/USD currently above 1.340.
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). Case-Shiller Home Prices beat expectations (6.2% vs. 6.1% expected) while consumer confidence rose to multi-year highs (129.5 vs. 124 expected). Later today, 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.