Amid a holiday-shortened week for US equities, FX markets will continue looking out for the latest clues surrounding the Fed’s intentions for raising US interest rates:
Monday, February 20
Tuesday, February 21
Wednesday, February 22
Thursday, February 23
Friday, February 24
It is a quieter calendar with Friday’s January PCE deflator data the highlight in the US.
But the bottom line is that rising short-term US interest rates as investors reprice the world’s most powerful central bank are supportive of a stronger USD, especially if we see hawkish undertones within the latest FOMC minutes or a higher-than-5% PCE deflator print.
Positioning, which has run against the dollar in recent weeks is not extreme but may be one-sided enough to support a short squeeze.
We also note that seasonal pressures do generally help greenback bulls in the first quarter, with Q1 witnessing the largest quarterly gain on average over the past 20 years:
With the big central bank meetings out of the way, this week brings with it the latest CPI data from the eurozone and focus on the Fed’s favoured inflation measure.
27 March 11:59
The dollar traded mixed against it peers in a narrow range yesterday and ahead of the pivotal FOMC rate decision later today. Investors have appeared a little more confident after the sharp selloff in risky assets early on Monday morning.
22 March 11:52
The European Central Bank is set to announce its rate decision at 13:15 GMT today (Thursday, March 16th). In short, EURUSD is perhaps likelier to react to market sentiment, rather than the fundamental actions of the ECB today.
16 March 11:14
More tightening would be good for the dollar which has struggled with the banking contagion issues.
15 March 10:53
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