Fundamental Forecast for Dollar: Neutral
- The probability of a rate hike by March 15th is 26 percent, May 3rd is 41 percent – will Yellen change those standings?
- Both the G-20 finance ministers meeting and Moody’s US sovereign credit review will offer outside feedback on the country’s bearing
- See what live webinars are scheduled to cover key market developments in FX and capital markets on the DailyFX Webinar Calendar
The Dollar was one of this past week’s best performers – and not just relative to other currencies. An ambitious rally from recent congestion was impressive, but its momentum is dubious. Motivation behind the drive was clear in unilateral improvement in US financial conditions via policy change. Yet, that particular price lever has been used liberally as of late, and its effectiveness will start to wane without tangible progress to offer speculators a foothold to carry the advance higher. In the week ahead, we have traditional economic data, updates for monetary policy standing and general risk trends. However, for various reasons all three of these themes will struggle for traction. Either we are delivered a dramatic surprise on these routine event risk, authorities spell out details which offers a policy advantage for the US or the climb in US markets (and currency) will quickly stall.
Taking stock of the event risk spread out through the coming week, there are listings for all of the most popular speculative themes of the past few months and years. That said, motivating the market here and now requires significant alterations to a particular fundamental theme. Over the past weeks, it has become rather clear that policy alterations are the least accounted-for risk moving forward and thereby the most capable of rendering significant movement in the Dollar and US assets. In the weeks that followed the US election in early November, market soared. This past week, the Dollar managed to break a significant bear trend. Motivation for both developments was founded from the same source: policy vows made by the new President.
