US stock markets continue to gyrate, though the high-low range for the Dow Jones Industrial Average this last week was ‘only’ 540 points with 50 points for the S&P 500 index. Overnight in Asia and this morning in Europe, futures markets are indicating the DJIA up 160 points with the S&P500 around 17 points higher. Against this background, the performance of the US Dollar continues to be pretty subdued. For all the worries about trade, tariffs, China, Russia and Syria, the entire range over the last 3 weeks for the USD index has been barely 1 ½ points. The first trading session of the week in Asia saw just one-tenth of a point separate the high and low but during the European morning, the USD has run in to some selling pressure with its index down more than a quarter of a point from Friday’s close.
The external environment for the US Dollar will probably be dominated by the events in Syria over the weekend and the international reaction to them, both politically and economically. All things equal, the biggest beneficiaries of a sharp reduction in global risk appetite are often the countries which run significant current account surpluses - Japan and the European Union – though the Eurozone is currently going through a relatively soft patch of economic data and its Central Bank is very publicly divided on the outlook for monetary policy. With so many subjects jostling for the President’s attention at the moment, it may be that the concerns over trade, tariffs and the economy get pushed a bit lower down his ‘to do’ list.
In terms of US economic data, a somewhat quieter week is in prospect. We’ve already had the CPI numbers, the labor market report and the Minutes of the last FOMC meeting. This week we have retail sales and business inventories on Monday, industrial production on Tuesday and the Philly Fed Survey on Thursday. There is a huge volume of Fed-speak to look forward to, also, with a dozen scheduled speeches in addition to the release of the Beige Book on Wednesday. After today’s numbers, the Atlanta Fed will be updating its forecast of Q1 GDP (currently 2.0%) later this afternoon. The USD index opens this morning in North America around 89.10.