Pre-Fed US Monetary Policy Report US Dollar Outlook


Several Fed members will have the opportunity to express their thoughts on the US economy and monetary policy today. This Pre-Fed US Monetary Policy Report US Dollar Outlook from Swissquote will tell you what to expect. 

23 February, Swissquote – After taking a breather on Thursday, the US dollar extended gains Friday amid easing rate concerns. US treasuries were better bid, which sent yields lower. The 10-year fell 3bps to 2.90%, while on the short-end of the curve the 2-year one was unchanged around 2.245%.

Since the beginning of the week, the buck has extended gains higher against all G10 currencies, making the biggest gains against the Swedish krona (+2.25%), the Norwegian krone (+1.30%) and high quality commodity currencies such as the Canadian, New Zealand and Australian dollar (+1.20%, +1.10% and +1%, respectively).

Pre-Fed US Monetary Policy Report US Dollar Outlook

With the exception of the publication of the January FOMC minutes on Wednesday, which didn’t really bring new information, it was a quiet week. However, several Fed members will have the opportunity to expose their view on the US economy and monetary policy today. Dudley and Rosengren will speak on Fed Balance Sheet, while Williams will speak on the US economic outlook. The three of them are voting members, so their opinion matters.

Next week will be busier in terms of economic data will the publication of January new home sales on Monday, wholesale inventories, durable goods orders for January on Tuesday, an update of Q4 personal consumption and GDP growth on Wednesday and personal income and spending as well as PCE for January on Thursday. The latter is by far the most anticipated report.

Indeed, over the last few weeks market participants were quite nervous about a potential acceleration of inflation, since it could force the Fed to accelerate tightening, which could ultimately cap economic growth.

EURUSD Technical Level

EUR/USD has stabilized around 1.2110 as selling pressure may have lessened for now. The currency pair is right in the middle of its monthly range (1.2165-1.2555), while the RSI has returned at 50. We do not expect much movement today; however, this evening speeches from Fed members could trigger sharp movement, especially should they hawkish/dovish comments about the current situation.

Asian markets head higher on Friday

Asian markets were heading higher on Friday, led by South Korean Kospi, surging at 2’451 (+1.54%), followed by Hong Kong Hang Seng valued at 31’290 (+1.05%) and Japanese Topix increasing at 1’760 (+0.82%) while Nikkei 225 closed the day at 21’893 (+0.72%), supported by Energy (+2.98%), Real Estate (+1.84%), Materials (+1.50%) and Utilities (+1.35%) due to higher oil-related stocks performance after oil price overnight gains (JXTG Holding +3.64%, Showa Shell Sekiyu +2.88% and Inpex +2.39%).

On the economic data side, Japan’s January Core Consumer Price Index Y/Y rose by 0.90% (consensus: 0.80% – M/M basis: 0.10%), in line with the previous month and confirming the view of a rather slow headline inflation rate.

US Treasury yields decrease, as the 10-year and 2-year are given at 2.9080 (-1.55%) and 2.2420 (-1.07%), despite Fed’s minute on Wednesday that maintained the stance of improving economic conditions and confirming more rate hikes for the coming year. US Equities remained stable on Thursday: Dow Jones Industrial Average, S&P500 and Nasdaq were closing at 24’962 (+0.66%), 2’704 (+0.1) and 7’210 (-0.11%).

Disclaimer

This article Pre-Fed US Monetary Policy Report US Dollar Outlook was written by Arnaud Masset & Vincent Mivelaz, analysts at Swissquote. While every effort has been made to ensure that the data quoted and used for the research behind this document is reliable, there is no guarantee that it is correct, and Swissquote Bank and its subsidiaries can accept no liability whatsoever in respect of any errors or omissions, or regarding the accuracy, completeness or reliability of the information contained herein.

This document does not constitute a recommendation to sell and/or buy any financial products and is not to be considered as a solicitation and/or an offer to enter into any transaction. This document is a piece of economic research and is not intended to constitute investment advice, nor to solicit dealing in securities or in any other kind of investments.

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