Daily Market Update

Dollar Rebounds Modestly After Terrible Run

January 29, 2018

After getting crushed most of last week, the U.S. dollar found some modest support overnight. The Bloomberg Dollar Spot Index fell for the seventh consecutive week last week, its worst run since 2010.

USD

This week’s docket is full of risk events that will give the greenback a chance to claw back some of its recent losses. This morning’s release showed that consumer spending rose 0.4% in December, matching expectations. Personal income slightly beat expectations, registering at 0.4%. The Fed’s preferred inflation measure, the PCE Deflator, showed price pressures are largely in check. Year-over-year inflation is at 1.7%, slightly under the Fed’s target.

Tomorrow’s economic docket is fairly light, but President Trump’s second State of the Union address will take the spotlight. Trump is expected to focus on the country’s strong economic run and record breaking stock prices. Traders will focus on his tone towards free trade and NAFTA so the Canadian dollar and Mexican peso are likely to experience some volatility.

On Wednesday, the Federal Reserve is expected to hold rates steady. The meeting will be Janet Yellen’s last as head of the central bank. There will not be a press conference following the decision so it may be a non-event. The biggest economic release will be Friday’s Non-Farm Payroll. Economists expect the U.S. economy added 180K jobs in January after a disappointing 148K in December.

 

EUR

The Euro slid slightly overnight but remains elevated versus the U.S. dollar. The Euro rose to a fresh three-year high against the U.S. dollar last week, gaining 1.5% last week alone. There was only second-tier data released today so traders instead are likely to allow technical levels to dictate trade today. Eurozone Gross Domestic Product is scheduled to hit the wire tomorrow.

 

GBP

Political infighting continues to be the story in the U.K. Prime Minister Theresa May continues to face critics from inside her Conservative party. Hardliners are pushing May to fire Phillip Hammond, the Chancellor of the Exchequer, who has lobbied for a “soft” Brexit. There have even been threats of a “no confidence” vote for May.

While the sterling suffered overnight, the currency has been very resilient and has traded back to levels last seen before the Brexit vote in the summer of 2016.

 

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