The US dollar is mostly weaker today. The currency is selling off against all major currencies except the Japanese yen. The dollar is currently the weakest against the Australian dollar and the Canadian dollar. While the buck was lower against the yen earlier in the day, a rebound in risk sentiment is helping USD/JPY strengthen. Looking at equity futures markets, Japan's Nikkei 225 is currently higher while the S&P 500 is also rebounding. Last Friday, global equity markets sold off sharply following weak growth data and rising fears of a trade war with China.
Turning to latest news, US Treasury Secretary Mnuchin told Fox News that the US is having “very productive conversations” with Chinese officials. He is also “cautiously optimistic” than an agreement can be made. His comments helped soothe concerns regarding a trade war, and have resulted in safe havens (such as the US dollar and the Japanese yen) selling off today. 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 105.0. EUR/USD is up slightly and trading above 1.2360. The pound is up, and GBP/USD is currently above 1.4160.
Looking at US economic data this week, we'll see personal consumption expenditures and the second-take of Q4 GDP growth. Later today, we'll see the Chicago Fed national activity index and hear speeches from Fed members including Dudley and Mester. On Tuesday, we'll get S&P/Case-Shiller home prices and hear speeches from the Fed's Quarles and Bostic. On Wednesday, we'll see the second-take of Q4 GDP growth and Q4 personal consumption expenditures. We'll also see February pending home sales and hear a speech from Bostic. Thursday is the most important day, and we'll see core personal consumption expenditures for February as well as initial job claims and Chicago PMIs. We'll also get a speech from the FOMC's Harker. Last week, Fed Chair Jerome Powell raised rates by 0.25% while suggesting that future policy will be determined based on incoming data.
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.