The U.S. dollar is in recovery mode this morning after losing again yesterday. The Bloomberg Dollar Spot Index traded lower for five straight days.
Without a sustained recovery today, the greenback would be headed for its longest stretch of declines since September.
We expect trading to be choppy due to thin liquidity. There are a number holidays across Asia including the Chinese Lunar New Year. Conditions will likely thin out further later in the day as ahead of the long weekend in the U.S. Tempus and financial markets will be closed on Monday, February 19th in celebration of President’s Day.
This morning’s economic data was positive but is likely having little impact on currency markets. Housing starts rose 9.7% in January, beating estimates of a 3.5% gain. Later this morning, the University of Michigan consumer sentiment will cross the wire and is expected to show a slight dip from December’s print.
The Euro touched a three year high overnight before retreating on apparent profit taking before the weekend. There was no major fundamental data released so the move can be attributed to general dollar weakness and thin markets. European Central Bank member Benoit Coeure said that trade growth is less likely to expand at the pace observed during the pre-crisis boom. He continued on to suggest that changes to forward guidance would be discussed in “early 2018” highlighting the trend that the U.S. Fed is not the only guest at the policy tightening party.
The Japanese yen continued its trend higher versus the U.S. dollar despite rising global equities. The yen briefly pushed passed a major technical level not breached since November 2016. The dollar has regained some of its losses but the trend of dollar weakness is clear. In a widely expected move, Prime Minister Shinzo Abe nominated Haruhiko Kuroda for another five-year term as the head of the Bank of Japan.