The US dollar is mostly lower today. Last Friday, the S&P 500 rebounded sharply. Looking at the largest Asian stock markets this morning, Hong Kong's Hang Seng Index is rebounding as well. Japan is closed for a holiday today. As fears of a stock market rout recedes, safe haven currencies such as the US dollar are falling in response. Turning to economic data, upcoming US inflation figures will be watched closely. Given concerns regarding rising inflation, US Treasury yields continue to soar. This morning, 2-year, 10-year and 30-year Treasury yields are all higher. If the consumer price index is higher than consensus estimates (2.1%), US Treasury yields may continue rising. Looking at trends, we will upgrade our short-term outlook on the US dollar to neutral today. Thanks to recent strength, the US dollar bear market has run out of steam in the short-term. Our medium-term outlook on the dollar remains bearish.
USD/JPY is flat today and currently trading above 108.60. EUR/USD is up and trading above 1.2280. The pound is up, and GBP/USD is currently above 1.3850.
Looking at US economic data this week, markets will be focused on retail sales and consumer price index figures. On Monday, we’ll get the monthly budget statement. Wednesday is the most important day, and we’ll see both retail sales and the consumer price index. Expectations for both sets of data are reasonably high. On Thursday, we’ll see initial jobless claims and the NAHB housing market index. We’ll also see the Philly Fed manufacturing survey as well as industrial production and capacity utilization. On Friday, we’ll get housing starts and building permits. Last week, strong PMI numbers suggested a positive outlook for US growth.
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.