For most of last week, the US Dollar’s fortunes largely mirrored those of the main US equity indices. At times when stock markets were rallying, the USD had an observable tendency to sell-off, whilst any sign of stress in equities had the opposite effect, leading to something of a safe-haven bid. The 2018 low point for the USD index came back on Friday February 16th at 87.95. As the stock market sold-off on Monday, Tuesday and Wednesday last week – culminating in a sharp dive lower after the FOMC Minutes – so the USD index rose to a best level for the week of 89.85; a 10-day high. On Thursday, stocks recovered and the USD fell (no surprise there) but on Friday the inverse relationship seemed to break down somewhat. Equity index futures were up almost the whole day but the USD was little moved, ending the week only a down three or four-tenths from Thursday’s best level. On this first day of the week in Asia and Europe, the old pattern has reasserted itself; a triple-digit gain for the DJIA has pushed the USD index down almost half a point to 89.10.
The last FOMC meeting was back on January 31st and at that point in time, stock markets hadn’t yet started the dramatic decline which began after the labour market and average earnings numbers on Friday February 2nd. In that sense, last week’s Minutes were out of date even before they were published. Since then, we now have a new Fed Chairman and this week will be his first semi-annual monetary policy testimony to Congress. Most of the published calendars for this week will show this being on Wednesday but it has in fact been moved forwards 24 hours to 10am Tuesday, apparently because the casket of preacher Billy Graham will be lying in state in the Capitol Rotunda for two days from February 28th; only the fourth ever private citizen to do so.
As well as Jerome Powell’s testimony, there is a raft of US economic data scheduled for release this week, although the first Friday of the month of March won’t bring the payroll numbers due to the Presidents Day holiday late in the already-short month of February. Tuesday brings wholesale inventories, the advanced goods trade balance, durable goods, and consumer confidence; the first three of which will all feed directly into the Atlanta Fed’s GDPNow model. Wednesday is the Chicago NAPM and existing home sales, whilst Thursday brings the personal income, expenditure and deflators as well as the ISM manufacturing survey. There’s scope for plenty of volatility around each of the data prints, though the tone and content of Mr Powell’s remarks will be key ahead of the March 22nd FOMC meeting. The USD index opens this morning in North America around 89.10; down almost three quarter of a point from Thursday’s high but still more than a full point up on the February 15th low.