US DOLLAR FUNDAMENTAL FORECAST: NEUTRAL
- US Dollar still mired in 2019 range, global growth bets next in focus
- Q1 earnings reports, economic data deluge to inform slowdown fears
- Thin pre-holiday liquidity may translate into kneejerk price volatility
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Another week of seesaw price action left the US Dollar mired within the same choppy range that has contained price action since the beginning of the year. The uptrend from early-2018 lows is nominally intact, but the currency has not made meaningful upside progress one way or another since mid-August.
Still, last week’s developments offered a couple useful tidbits. First, the markets still respond to reminders about cooling global growth. The IMF’s grim outlook update had a sobering effect. Second, price moves on the release of US inflation data and March FOMC minutes showed Fed policy speculation continues.
EARNINGS REPORTS, ECONOMIC DATA TO INFORM GLOBAL GROWTH BETS
Looking ahead, a focus on the macroeconomic narrative seems likely as trade war and Brexit negotiations recede to churn on in the background. A steady stream of high-profile corporate earnings reports and ample economic news will inform jittery investors eyeing a business cycle downshift.
US banks including Goldman Sachs, Citigroup and Bank of America are due to report first-quarter results. Upbeat announcements from JPMorgan and Wells Fargo buoyed market-wide risk appetite on Friday, sapping demand for haven assets and weighing on the anti-risk US unit.
This need not necessarily repeat however. The FOMC minutes painted the tone on the rate-setting committee more neutral than markets expected, boosting USD. A steady stream of Fed-speak due next week might reiterate that point, diluting scope for weakness on purely “risk-on” grounds.
The data docket is packed. Eurozone PMIs, Chinese GDP, and US industrial production are just some of the noteworthy activity indicators set to cross the wires. If the recently disappointing trend in macroeconomic news flow holds, the outcomes may weaken risk appetite on net. That bodes well for the Greenback.
LIQUIDITY TO SHRINK IN PRE-HOLIDAY TRADE
Finally, the week will be shortened by the Good Friday holiday and overall participation is likely to progressively diminish as Easter weekend draws closer in most of the world’s financial centers. Thin liquidity levels may sap conviction, but they might also amplify any kneejerk volatility.
— Written by Ilya Spivak, Sr. Currency Strategist for DailyFX.com
To contact Ilya, use the comments section below or @IlyaSpivakon Twitter
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