The US dollar is currently mixed. The dollar is strengthening against the Australian dollar, while selling off against the Japanese yen and the euro. Yesterday, the buck sold off for the third session in a row. Following conciliatory comments from Chinese President Xi at the Boao Forum, and Trump's tweet saying he was "very thankful" for Xi's recent actions, risk sentiment has been improving. As a result, high-beta currencies such as the Australian dollar have been strengthening, while safe havens such as the yen have been selling off.
Today, the "risk-on" trade is reversing to a small degree. Turning to data, the US producer price index was ahead of expectations. While producer prices have been accelerating in recent history, the consumer price index (to be announced later today) remains relatively subdued. As a result, bond yields have been weakening despite fears of rapidly accelerating inflation. If today's inflation figures miss consensus estimates (2.4%), expect the dollar to resume selling off. Our short-term outlook on the dollar is neutral, while our medium-term outlook remains bearish.
USD/JPY is down slightly today and currently trading above 107.0. EUR/USD is up slightly and trading above 1.2360. The pound is up slightly, and GBP/USD is currently above 1.4180.
Looking at US economic data this week, traders will be watching inflation data. The producer price index for March (3% vs. 2.9% expected) accelerated above estimates. Later today, the most important day, we'll see the consumer price index for March. We'll also see minutes from the last FOMC meeting. On Thursday, we'll see initial jobless claims. On Friday, we'll hear a speech from the Fed's Bullard and see consumer sentiment figures for March. Last week, non-farm payrolls figures missed expectations by a wide margin.
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.