The US dollar is up today after strengthening yesterday. News from Washington has been driving the dollar this week. Firstly, Reuters is reporting that the US Congress has passed legislation to fund the government until December 22 - this pushes back the debt ceiling issue. Secondly, Trump has announced that he will outline his infrastructure investment program in January (according to Bloomberg). During his campaign, Trump promised a $1T spending program in order to repair infrastructure. Lastly, hopes for a tax deal between House and Senate Republicans are rising following an agreement to temporarily extend US government funding. Today is another important day for the dollar as nonfarm payrolls are set to be announced. Unlike the previous reports, this will be the first nonfarm payroll release that will not be influenced by weather-related issues. Our medium-term outlook on the dollar remains neutral.
USD/JPY is up and currently trading just above 113.40. EUR/USD is down today and currently just above 1.1750. The pound is up, with GBP/USD currently above 1.3480.
This week, we’ll see economic events including PMIs, nonfarm payrolls, and the US debt ceiling deadline. Month-over-month factory orders (-0.1% vs. -0.4% expected) and durable goods (-0.8%) were fairly weak. Markit Composite PMIs (54.5 vs. 55.2 prior) were lower than the previous print. ISM Non-Manufacturing PMIs (57.4 vs. 59 expected) were lower than expectations. The trade balance (-48.7b vs. -47.5b expected) was also worse than expected. ADP jobs were higher than expected (190k vs. 185k expected) while nonfarm productivity was worse than estimates (3% vs. 3.3% expected). Initial jobless claims (236k vs. 240k) and consumer credit (20.5b vs. 17.5b expected) were better than expected. Today, we’ll get nonfarm payrolls. Last week, the Senate passed the tax bill, helping to stoke future inflation expectations.
As the dollar rebounds from its lows in early September, we are upgrading the US dollar to neutral. 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.