The US dollar has run out of steam after the stock market rout appeared to come to an end yesterday. After falling sharply earlier in the week, the S&P 500 rebounded by 1.74% yesterday. Today, Asian stock markets including Japan's Nikkei 225 and Hong Kong's Hang Seng Index are also higher. While the dollar is currently lower against the Japanese yen, it is flat against the euro and the British pound. The dollar is gaining against commodities currencies such as the Australian dollar and the Canadian dollar. Looking at recent data, both JOLTS job opening and the goods trade balance were below expectations. The increasing trade deficit is likely to weigh on Q4 2017 GDP growth figures. Overall, most economic data continues to suggest that the US expansion continues. Our short-term and medium-term outlook on the dollar remains bearish
USD/JPY is down today and currently trading above 109.10. EUR/USD is flat and trading above 1.2370. The pound is flat, and GBP/USD is currently above 1.3950.
Looking at US economic data this week, markets will be focused on more PMI surveys. Markit services (53.3) and composite PMIs (53.8) were fairly close to consensus expectations. ISM non-manufacturing PMIs were ahead of expectations (59.9). The goods trade balance ($-53.1b) and JOLTS job openings (5.8m) were below consensus estimates. Later today, we’ll see MBA mortgage applications and consumer credit. On Thursday, we’ll see initial jobless claims. Last week, core personal consumption expenditures met expectations while non-farm payrolls beat expectations.
Thanks to recent dollar weakness, we are downgrading the US dollar to bearish. Note that the currency is trading within normal conditions. This is based on technical indicators when looking at a weekly chart.