US Dollar Mostly Flat But a Volatile Week is Likely

USD

Despite a touch of volatility overnight, the Bloomberg Dollar Spot Index is little changed since Friday’s close. Following a week light on risk events, this week’s economic docket is chalked full of potential market movers.

There is no major economic data slated for today, but Federal Reserve Chair Janet Hellen will be testifying in front of Congress this week. She will begin speaking in from of the Senate Banking Panel tomorrow at 10 a.m. and then she will give her semi-annual testimony to the House panel on Wednesday. We expect Congress to grill Ms. Yellen, per usual. However, she is unlikely to give a clear indication as to when the central bank will lift rates again. Of course, that will not stop market participants from parsing her words for clues. The probability for a March hike is currently at 30.0%. Odds for a May hike are down slightly to 48.0%.

This week also sees the release of the Producer Price index and consumer price index. CPI will be especially important as higher consumer prices will put pressure on the central bank to boost rates. Advanced retails sales will also peak interest as consumer spending accounts for nearly 70% of the U.S. economy. With no major data slated for Friday, Housing starts will round out the week on Thursday.

Markets, in general, are also awaiting the details of Trump’s proposed tax-cut plans.

All markets will be closed next Monday, February 20th in celebration of Presidents Day.

 

EUR

The Euro held familiar ranges versus the U.S. dollar as the week of trading opened. German Whole price index data showed that inflation pressures in Europe’s largest economy continue to build. Tomorrow could be a pivotal day for the common currency as preliminary Gross Domestic Product figures will be released for Germany and Italy.

Political headlines could also cause reaction in currency markets. Greece and the creditors at the IMF are set to clash over whether the country can meet the requirements of their loan. The pending elections in France will also catch headlines with traders not completely ruling out a surprise victory by the far-right candidate.

 

JPY

The Japanese yen is under pressure this morning. The highly anticipated meeting between President Trump and Japanese Prime Minister Shinzo Abe failed to jolt markets as the two did not mention currency levels or trade deals. The pair did have to contend with a missile test and threat from North Korea, but the event seems to have had minimal effect on the currency market.