After weakening yesterday, the US dollar is mostly flat this morning. Earlier today, the US dollar was higher following regional elections in Catalonia. As pro-independence political parties fared much better than expected, the euro has been selling off today. As a result, the US dollar index rose. In US political news, the Senate approved an extension of government funding to January 19, 2018. President Trump is expected to sign the bill into law. In economic data, Q3 US GDP growth was revised down to 3.2% (from 3.3%). The small revision had a limited impact on the currency. Initial jobless claims were worse than expected. In general, markets remain upbeat regarding the outlook for US growth. Our short-term and medium-term outlook on the dollar remain neutral.
USD/JPY is flat today and currently trading just above 113.30. EUR/USD is down slightly and currently just above 1.1850. The pound is flat, with GBP/USD currently above 1.3380.
This is a reasonably light week for the US dollar in terms of economic data and events. New building permits (1.3m vs. 1.27m expected) and housing starts (1.3m vs. 1.27m expected) were better than expected. The current account deficit was smaller than expected (-100.6b vs. -116.8b expected). Existing home sales beat expectations (5.8m vs. 5.5m expected). Final Q3 GDP growth was slightly lower than expectations (3.2% vs. 3.3%). Initial jobless claims (245k vs. 231k expected) were also worse than expectations. The Philly Fed Manufacturing Survey (26.2 vs. 21.5 expected) beat expectations. Later today, we’ll see November Core PCE, durable goods, and new home sales. Last week, Core CPI missed expectations and the Fed signaled a continuation of the status quo.
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.