There wasn’t much in the way of economic data today and U.S. stock markets are closed because of Presidents’ Day holiday. Stating the obvious here, but it has been a rather quiet and dull day in the markets. Things will hopefully pick up from Tuesday, although Wednesday is likely to be most important day of the week – certainly for the dollar – due to the release of the FOMC’s last meeting minutes.
European stocks rose on Monday, with gains in telecoms and banks offsetting a big fall in Unilever, while the dollar dipped as uncertainty over politics and the timing of a U.S. interest rate rise kept investors nervous.
Monetary policy guidance and strong U.S. data failed to provide another push higher for the greenback last week. Fed Chair Janet Yellen made a blunt statement in her testimony before Congress that it would be unwise to wait too long to tighten monetary policy.
The increasing levels of volatility the Greenback has dished out this month continues to highlight how the currency remains entangled in a fierce tug of war between the Fed hawks and President Trump. Although it may be clear that Trump may want a weaker dollar to help U.S. exports become competitive on the global markets, the heightened expectations of a proposed expansionary fiscal plan which will be supportive of US growth may uplift the Greenback.
The U.S. dollar is higher against most major pairs ahead of the Presidents Day long weekend. American economic fundamentals had a strong week, but failed to gain traction given the rise of political risk as Trump's Administration continues to send mixed messages to markets. The stock market and safe havens like gold and the Japanese yen finished higher against the dollar in a very political week.
Imagine if, at the start of the week, I had told you the following: Top-tier US data would be unanimously strong, with solid readings on inflation (CPI and PPI), retail sales, and a 30-year high in the Philly Fed Manufacturing index.
Stock markets were explosively volatile this week, with most areas sprinting into record levels as the mixture of stabilizing oil prices and improving economic data across the globe boosted risk appetite.