The US dollar is mixed this morning after strengthening last Friday. Following last week's sharp sell-off, the dollar appears to be taking a breather for now. Today, the currency is higher against the Japanese yen, while trading lower against the euro, the Australian dollar and the Canadian dollar. Note that today is a public holiday (President's Day) in the United States. In general, the dollar remains in a bear market. Optimism for ex-US growth (particularly in the Eurozone) and concerns regarding US government deficits (following tax cuts and accelerated spending) are helping to keep the US dollar weak. While the Federal Reserve continues to hike interest rates, expectations are rising for foreign central banks to tighten monetary policy as well. Turning to economic data, this is a pretty light week for the buck. Beyond FOMC minutes, we'll see a series of Federal Reserve voting members speaking on monetary policy. Our short-term and medium-term outlook on the currency remains bearish.
USD/JPY is up today and currently trading above 106.40. EUR/USD is up slightly and trading above 1.2410. The pound is flat, and GBP/USD is currently above 1.4020.
Looking at US economic data this week, there are quite a few Federal Reserve speakers. On Wednesday, we’ll see Markit PMIs (services, manufacturing and composite) as well as existing home sales. We’ll also get FOMC minutes. On Thursday, we’ll see initial jobless claims. Federal Reserve members including Kashkari, Quarles and Bostic will also be speaking on that day. On Friday, Dudley (another voting member of the Fed) will deliver a speech. Last week, the consumer price index was ahead of consensus estimates.
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.