Appetite to Sell the Dollar
There remains real appetite to sell the USD even after the brash dollar sell off post-FOMC as it’s becoming evident to all the Greenback has problems, and the can of worms is barely open.
The Dovish FOMC combined with the US political imbroglio saw little appetite for dollars heading into weeks end. But complicating the narrative this week will be month end flow, Eurozone CPI, GDP and US payrolls this week. However, on Tuesday the key US Price Consumption Expenditures index or PCE figures are released which could provide more transparency into the inflation as transitory narrative.
Inflation concerns remain in the FED spotlight, and with the market split on whether the FOMC may or may not raise interest rates again in 2017, any and all inflation metrics will be in focus. But given the PCE is Fed’s preferred inflation gauge, the print could be this week’s primary focal point.
Emerging from the Fed blackout traders turn to speeches by the Loretta Mester and John Williams, both scheduled for Thursday night.And while they’re expected to toe the plank it’s possible they may offer some fresh insight regarding the central bank’s balance sheet “ relative soon” timeline
It’s a huge week on the data front, but for USD bulls there’s an unpalatable reality that with ECB members sounding increasingly hawkish and their FOMC counterparts ever so dovish anything to confirm this bias will be pounced on by traders.
With that in mind, it’s a busy week on the EU economic diary, so a higher than expected Eurozone CPI on Monday and a strong follow up Eurozone GDP on Tuesday could see the single currency push above 1.1800 as the greenback struggles to find buyers on the dovish Fed narrative.
The current Euro strength is as much about broad USD weakness and with the plausibility that positioning is still not stretched, it not only suggests investors buying dips will cushion the downside but that the…