The United States Dollar has returned to positive trading this morning following a rebound in yesterday's afternoon session
Overview
After inflation data released yesterday showed US core consumer prices grew less than expected last month, the Dollar initially sold off and weakened, but through the day as traders digested the meat of the data release the Buck staged quite a comeback and closed the day stronger than at the open. Several speakers from the Federal Reserve yesterday also helped fuel the Dollar’s largely positive response to what would otherwise be a lackluster data point – four voting members of the central bank spoke yesterday and emphasized, across the board, that further progress on disinflation is still needed even following December’s CPI undershoot.
After inflation data released yesterday showed US core consumer prices grew less than expected last month, the Dollar initially sold off and weakened, but through the day as traders digested the meat of the data release the Buck staged quite a comeback and closed the day stronger than at the open. Several speakers from the Federal Reserve yesterday also helped fuel the Dollar’s largely positive response to what would otherwise be a lackluster data point – four voting members of the central bank spoke yesterday and emphasized, across the board, that further progress on disinflation is still needed even following December’s CPI undershoot.
This morning the US released retail sales for the month of December, also showing that consumers writ large purchased less than expected during the typically-busy holiday season. Ordinarily this, coupled with a softer-than-expected CPI, would drive the Buck firmly into negative trading territory, but the Dollar’s reaction has been extraordinarily muted and USD is holding onto most of yesterday’s rebound. Retail sales grew a rather paltry 0.4% in December, below both expectations and November’s reading of 0.7%. It appears, though, that traders are shrugging off this week’s data points for the most part and have turned their focus primarily to the incoming Trump administration, with the new President set to take office this coming Monday. Ahead of Trump’s inauguration next week, the new President’s pick for Treasury in Scott Bessent is set to have his confirmation hearing before Congress today. Markets will without a doubt be looking for clues on Bessent’s mindset regarding the Dollar, trade policy, and independence of the Federal Reserve amongst many other topics. Ordinarily this, coupled with a softer-than-expected CPI, would drive the Buck firmly into negative trading territory, but the Dollar’s reaction has been extraordinarily muted and USD is holding onto most of yesterday’s rebound. Retail sales grew a rather paltry 0.4% in December, below both expectations and November’s reading of 0.7%. It appears, though, that traders are shrugging off this week’s data points for the most part and have turned their focus primarily to the incoming Trump administration, with the new President set to take office this coming Monday. Ahead of Trump’s inauguration next week, the new President’s pick for Treasury in Scott Bessent is set to have his confirmation hearing before Congress today. Markets will without a doubt be looking for clues on Bessent’s mindset regarding the Dollar, trade policy, and independence of the Federal Reserve amongst many other topics.
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What to Watch This Week…
- December Industrial Production, Friday 9:15AM
- Monex USA Online is always open
EUR ⇓
The single currency, amidst a dearth of top-tier local data this week, was unable to hold onto its initial gains following the release of US CPI yesterday and is continuing to trade lower today. EUR, however, is managing to tread water on a weekly basis and is about three quarters of a percent stronger than at Monday morning’s US open. EURUSD traders are very heavily focused on the potential for high tariffs coming from the incoming Trump administration targeting the Eurozone, though chatter this week has suggested that such actions may be more gradual than previously expected and extending EUR a lifeline.
JPY ⇑
Japanese Yen is extending its recent winning streak this morning and is once again the pest-performing currency in the G10 today, gaining a further quarter of a percent of value against USD. Today’s move brings JPY’s weekly performance to roughly a percent of gains against the Buck ahead of the Bank of Japan’s interest rate decision at the end of next week. The BoJ, following statements from both its Governor and Deputy Governor, is largely expected by markets to raise interest rates by 25 basis points.
