Global Themes

The U.S. dollar was mostly flat Monday ahead of an events-filled week ahead. The buck has appreciated against a broad basket of currencies in recent weeks thanks to the relatively rosy shape of the world’s biggest economy. Still, meaningful dollar gains have been held in check this year amid frustration in the Trump administration offering details on its plans help the U.S. economy shift into a higher gear that has long proven elusive. Focal points of the week ahead include the president’s prime time speech Tuesday night to a joint session of Congress, U.S. data on revised fourth quarter growth, consumer confidence and inflation, and a Friday speech by Federal Reserve Chair Janet Yellen. The outcomes of this week’s critical events should help determine whether the dollar’s three-week winning streak has legs.

GBP

Pesky political risk returned to the surface to weigh on sterling at the start of an important week for the British economy. Fresh off one of its best weeks all year, the pound slipped Monday on reports that Scotland is mulling another referendum on its U.K. membership. The mere mention of political risk is enough to undermine sterling sentiment with Brexit uncertainty keeping elevated. Forecasts call for local numbers Wednesday and Friday on factory and services growth respectively to moderate.

EUR

The euro tip-toed higher against the U.S. dollar Monday, leaving the politically-vulnerable currency at risk of being sold given the uncertain outlook for presidential politics in France, the euro zone’s second biggest economy. The euro found support Monday from news that economic optimism across the 19-nation economy brightened in February. Numbers Thursday on area inflation and unemployment will also shed light on whether the bloc is enjoying a meaningful rebound, one that could hinge on the outcome of France’s presidential vote in the spring.

AUD

The Aussie dollar edged below three-month highs as global stock market weakness favored safer plays at the expense of high yielders like the Aussie, home to the developed world’s second-juiciest yield after New Zealand. The Aussie’s short run prospects are seen hinging on Australia’s fourth quarter growth report due Wednesday and forecast to show healthy bounce in activity after spending the third quarter in reverse.

USD

The dollar shrugged off mixed news on the U.S. economy with many investors favoring the sidelines ahead of the president’s speech tomorrow night to a joint session of Congress. Durable goods bounced nearly 2 percent in January. Still, the measure of business spending disappointed with an unexpected decline of 0.4 percent. The data followed news Friday of underwhelming new home sales and dimmer consumer sentiment, albeit from 13-year highs, suggesting a Fed rate hike in mid-March remained a longshot.

CAD

The loonie was mostly steady, shrugging off a bounce in oil markets to above $54, with underlying sentiment keeping cautious ahead of the Bank of Canada on Wednesday. Like it has since 2015, the BOC is expected to keep its base interest rate steady at 0.50 percent. Data last week showed mixed news on inflation whose headline level topped the central bank’s 2 percent bullseye, though other measures of price pressures remained in tame terrain south of that. Any reiteration from the BOC that a rate cut remains on the table would bode bearishly for the loonie.

Deliver the Daily Currency Market Analysis to my Inbox

Published five days a week, this newsletter provides day-to-day trends and activities affecting the market in easy-to-understand snapshots.