The US dollar is once again higher today, and is currently gaining against all major currencies. The dollar is currently strongest against the Japanese yen and the Australian dollar. Yesterday, the US government successfully sold $179 billion in Treasury securities. Despite fears of accelerating budget deficits, the sale went without any issues. Today, most US Treasury bond yields are falling. Turning to the economic calendar, traders will be focusing on upcoming FOMC minutes. The minutes from the Federal Reserve's January 30-31 meeting are not expected to highlight a significant shift in policy. While the Fed is likely to upgrade its outlook on inflation and growth, more substantive changes are likely to arrive later this year. Note that the meeting took place before the significant stock market sell-off in early February. While the US dollar has enjoyed a good rebound across the last four trading sessions, it remains in a downtrend. If ex-US growth data remains strong, expect the US dollar to weaken relative to other currencies such as the euro. Our short-term and medium-term outlook on the currency remains bearish.
USD/JPY is up today and currently trading above 107.70. EUR/USD is down slightly and trading above 1.2320. The pound is down slightly, and GBP/USD is currently above 1.3970.
Looking at US economic data this week, there are quite a few Federal Reserve speakers. Later today, 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.