USD Daily Updates

13 March 2018

The US dollar is currently mixed. The buck is flat against the euro, while gaining against the Japanese yen and the British pound. Turning to upcoming economic data, movements in the dollar are likely to remain subdued until the Consumer Price Index for February is announced. After registering at 2.1% (year-over-year) in the previous month, the consensus estimate is for inflation to accelerate to 2.2% in February. As we have written before, inflation is more likely to decelerate starting in February. Firstly, inflation was high at this point last year, meaning that base effects make continued gains more difficult. Secondly, commodity prices have been falling after hitting a peak in late January, suggesting a weaker outlook for inflation. If inflation figures come in below estimates, expect the dollar to weaken accordingly. On the other hand, the dollar should strengthen if inflation beats estimates. 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 106.80. EUR/USD is flat and trading above 1.230. The pound is flat, and GBP/USD is currently above 1.3890. 

Turning to US economic data this week, markets will be focused on inflation and retail sales figures. On Tuesday, we'll see headline inflation for February. On Wednesday, we'll get March retail sales and the producer price index for February. On Thursday, we'll get initial jobless claims, the Philly Fed manufacturing survey and the NAHB housing market index. Finally on Friday, we'll see a number of figures relating to housing (housing starts, build permits), industrial production and capacity utilization. Last week, non-farm payrolls came in above expectations while wage growth failed to meet expectations. 

Updated 
Outlook
Bearish

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. 

Updated