The US dollar is mostly lower. The currency is currently flat or weaker against all major currencies except the Canadian dollar. The buck is the weakest against the Australian dollar. Last week, the dollar ended the week lower in relative terms as the euro strengthened on monetary tightening hopes. As we wrote in a recent commentary, the euro has few reasons to keep strengthening.
Turning to recent news, Trump tweeted "Mission Accomplished!" following strikes against Syria over the weekend. Last week, US Treasury bonds and gold strengthened in anticipation of US military action. However, movements in safe haven assets are relatively subdued today as a further escalation is seen as unlikely.
Looking at other asset classes, Hong Kong's Hang Seng Index and the Shanghai Composite are both undergoing significant sell-offs today. While the Chinese central bank raised its 14-day rates, Hong Kong's de facto central bank has been intervening in the Hong Kong dollar in order to support the peg. As China tightens monetary policies as its economy slows, growth-sensitive assets such equities are selling off in response. While today's events are having a limited impact on financial assets outside China, expect this to change in the near future. Our short-term outlook on the dollar is neutral, while our medium-term outlook remains bearish.
USD/JPY is down today and currently trading above 107.10. EUR/USD is flat and trading above 1.2330. The pound is flat, and GBP/USD is currently above 1.4250.
Looking at US economic events this week, the most important data release is YoY March retail sales. Later today, we’ll see March retail sales and hear a speech from FOMC member Bostic. Tomorrow, we’ll see March build permits, housing starts and hear a speech from FOMC member Williams. We’ll also see industrial production and capacity utilization for March. On Wednesday, we’ll see the Fed’s Beige Book and hear speeches from Fed members including Dudley and Quarles. On Thursday, we’ll see initial jobless claims and hear another speech from Quarles. On Friday, we’ll hear a speech from FOMC member Mester. Last week, the consumer price index for March met expectations.
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.