The US dollar ended the day flat yesterday and remains flat this morning. Yesterday, the currency fell in the morning but made up all losses by the end of the day. Markets will be focused on PPI numbers to be released later today. The consensus estimate is for PPI to accelerate to 2.9%. CPI will be announced tomorrow ahead of the Fed meeting. Both sets of data are likely to show that inflation accelerated in November thanks to higher commodity prices. As a rate hike is widely expected, the Fed will need a communicate a fairly hawkish outlook in order to drive the dollar higher. This is increasingly likely as the Fed event on Wednesday is Janet Yellen's last meeting in her role as Chair. Our short-term and medium-term outlook on the dollar remain neutral.
USD/JPY is down and currently trading just above 113.450. EUR/USD is up today and currently just above 1.1770. The pound is up slightly, with GBP/USD currently above 1.3340.
This is a big week for the US dollar in economic data and events. We'll see PPI (producer prices) later today. Tomorrow is the most important day with both November CPI and the Fed’s interest rate decision and statement. As the Fed is widely expected to raise rates, markets will be focusing on the Fed’s outlook for inflation and rate hikes in 2018. On Thursday we’ll see retail sales, as well as Markit PMIs. On Friday we’ll see industrial production and capacity utilization. Last week, nonfarm payrolls beat expectations while wage growth disappointed.
As the dollar rises alongside higher inflation expectations, we are upgrading the 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 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.