The US Dollar had a dramatic week which saw it fall a net 1.7% against a basket of major currencies. Its index opened last Monday morning around 90.25 but fell persistently to a fresh low on Thursday of 88.20; its weakest since early-December 2014. After President Donald Trump delivered his “America First but not Alone” speech to a packed conference hall in Davos on Friday, the USD steadied somewhat to end a very dramatic week at 88.70. Overnight in Asia and this morning in Europe, the USD has remained pretty stable, with the index two-tenths higher at 88.90.
The week ahead brings plenty of news on the US economy as well as Dr Janet Yellen’s last meeting as Chairman of the Federal Reserve Bank. Market-derived probability estimates show just a 3% chance of a 25bp hike in rates, with the overwhelming view being this will not come until the March 21st FOMC meeting. On Tuesday we get the latest reading on consumer confidence, Wednesday it’s the Chicago NAPM then on Thursday the ISM manufacturing survey. The first Friday of the new month, as usual, is the labour market report where consensus estimates are for non-farm payrolls to have increased about 180k with the unemployment rate steady at 4.1%. Before all that, today we have the personal income and spending numbers as well as the very important PCE deflators which will be watched very closely for signs of progress towards the Fed’s goals.
After President Trump’s sales pitch to world leaders in the Swiss Alps, tomorrow is his opportunity to pitch to a domestic audience. When the President delivered his first address to US Congress last year, it was technically not termed a State of the Union speech because he had only been in office for five weeks. In a Press briefing on Sunday, a senior administration official told reporters that when Mr Trump speaks at 9pm EST on Tuesday, laying out future plans and reflecting on his first year in office, he will be “speaking from the heart” to discuss jobs and the economy, infrastructure, immigration, trade and national security. The speech is titled, “Building a safe, strong and proud America”. The US Dollar index opens in North America this morning at 88.90 but keep a close eye on 10-year bond yields which this morning hit 2.72%; a fresh high for this cycle.