The US dollar is mostly higher today, and is currently rising against all major currencies. The dollar is strongest against the Australian dollar, the euro, and the Japanese yen. Earlier this week, FOMC minutes raised the risk of a faster pace of rate hikes, driving up US Treasury yields and causing the dollar to sell off against Japanese yen. Over the last two days, US Treasury yields have moderated. Looking at US equity markets, the S&P 500 ended the day higher yesterday. This morning, Asian equity markets such as Japan's Nikkei 225 is higher while Hong Kong's Hang Seng Index is flat. As bond yields moderate and risk sentiment improves, the US dollar is gaining against the Japanese yen. Turning to economic data, initial jobless claims were better than expectations. In other news, Federal Reserve Vice Chairman Randal Quarles said that the US should continue raising rates at a moderate pace. He also said that current US policy "remains accommodative". Finally, he stated that the US economy "appears to be performing very well". Both actual US economic data and the Fed's outlook on the economy has been improving this year. Our short-term outlook on the dollar is neutral, while our medium-term outlook remains bearish.
USD/JPY is up today and currently trading above 106.90. EUR/USD is down and trading above 1.230. The pound is flat, and GBP/USD is currently above 1.3940.
Looking at US economic data this week, there are quite a few Federal Reserve speakers. Markit Composite PMIs (55.9 vs. 54.4 expected) were ahead of estimates while existing home sales (5.4m vs. 5.6m expected) fell below estimates. FOMC minutes suggested an upgraded outlook for growth and inflation. Initial jobless claims (222k vs. 230k expected) beat expectations. Federal Reserve members signaled an improving outlook for the economy. Later today, Dudley (another voting member of the Fed) will deliver a speech. Last week, the consumer price index was ahead of consensus estimates.
As the dollar gains strength, we are upgrading the dollar to neutral in the short-term. Note that the currency is now trading within normal conditions in the short-term time frame. Our analysis is based on various technical indicators when looking at a daily chart of the US dollar index.
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.