The US dollar is once again lower today following recent comments from Treasury Secretary Mnuchin and President Trump. A day after Mnuchin claimed that a weaker dollar would benefit US trade, Trump said that he wanted a "strong dollar". While the currency initially rose following Trump's comments at the World Economic Forum in Davos, Switzerland, the US dollar is trading lower today. Looking at the latest economic data, initial jobless claims were better than expectations, while new home sales were lower than expectations. Both figures had a fairly limited impact on the currency. Later today, markets will be expecting fourth quarter GDP growth to expand by 3% (quarter-over-quarter annualized). Looking at technical conditions, the US dollar continues to look oversold on a daily chart and a weekly chart. Our short-term and medium-term outlook on the dollar remains bearish.
USD/JPY is down today and currently trading above 109.40. EUR/USD is up and is trading above 1.2430. The pound is up, and GBP/USD is currently above 1.4180.
Looking at economic data this week, markets will be watching PMIs and Q4 GDP figures. The Chicago Fed National Activity Index was lower than expectations (0.27 vs. 0.44 expected). The housing price index (6.5%) was just below expectations while Markit composite PMIs (53.8 vs. 53.5 expected) were ahead of consensus estimates. Existing home sales (5.57m vs. 5.70m expected) were slightly below expectations. Initial jobless claims (233k) beat expectations, while new home sales (0.625m) were lower than consensus estimates. Later today, we'll get Q4 GDP and durable goods orders. Last week, industrial production figures exceeded consensus estimates by a large margin.
Thanks to recent dollar weakness, we are downgrading the US dollar to bearish. Note that the currency is looking oversold. This is based on technical indicators when looking at a weekly chart.