The US dollar is weaker this morning after selling off yesterday. The US dollar began selling off yesterday following the release of December minutes from the European Central Bank. The minutes hinted that the ECB would begin communicating a potential change of its monetary policies in early 2018. This it the first time the Bank has officially acknowledged that the Eurozone's improving economy will result in tighter monetary policy. As the euro soared following the news, the US dollar weakened in relative terms. Looking at US economic data, core PPI numbers and initial jobless claims were both worse than expected. While the ongoing bull market in stocks and commodities suggests that growth and inflation are set to keep accelerating, yesterday's data suggests that optimism might be getting stretched. Markets will be paying close attention to core CPI set to be announced later today. Our short-term and medium-term outlook on the dollar remains bearish.
USD/JPY is up today and currently trading above 111.30. EUR/USD is up and is trading above 1.2060. The pound is up slightly, and GBP/USD is currently above 1.3540.
Looking at economic data this week, markets will be watching upcoming retail sales and inflation figures. JOLTS job openings (5.9m vs. 6.0 expected) missed expectations. Export prices (-0.1% vs. 0.3% expected) and import prices (0.1% vs. 0.5% expected) both missed expectations. Initial jobless claims (261 vs. 245k expected) and core PPI (2.3% vs. 2.5% expected) both missed expectations. Today is the most important day, and we'll see Core CPI, retail sales, and weekly earnings. Last week, nonfarm payrolls numbers missed expectations.
Following the holiday season sell-off, 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.