USD's outlook after the ECB and the NFP

So, here we are again. The ECB launched QE and the US released another up beating Non Farm Payrolls report, and the greenback is soaring across the board. 

Last Thursday, the ECB announced it will start purchasing assets as soon as next Monday, as largely announced in January. The Central Bank also offered  upward revisions to its inflation and GDP readings for the upcoming years, but the overall sentiment of the market towards this, is that is too optimistic. The common currency took a hit and dive towards 1.1000 against the greenback, and held right above the level until the release of the US monthly employment figures. The US NFP surprised to the upside, with the economy adding 295,000 new jobs on Friday, and the unemployment rate ticking down to 5.5%. Wages remained weak, rising below expectations, the only shadow over the encouraging readings. Anyway, market ignored what did not accompanied the dominant bullish dollar trend. 

This job report relevance comes from the fact that it encourages a FED rate hike, and after the release, speculation is that the Central Bank can move as soon as April, from previous June bet. But to be realistic, chances are quite limited considering inflation remains subdued, and oil prices are far from confirming a bottom, one of the major reasons inflation remains depressed in the US. 

Adding to all of the above, comes the fact that the latest COT reports showed that USD bull positions hold near record highs, particularly against the EUR and the JPY. So the big question now is, whether the greenback can extend its bullish momentum or not, until the FED makes its first move. 

In general, and disregarding current employment rate, the US data has been quite soft lately, a tiny red flag for the greenback. By contrast, European data has been improving, in the past two months. Anyway, one swallow does not make a summer and a couple of bad, or good readings can't made a trend. 

That's why the market will be paying extra attention to upcoming macroeconomic figures, as those will provide additional information on when the FED will take its first step into the tightening path. 

Next week, will start with Kocherlakota, Fisher and Mester, all from the FED, hitting the wires with different speeches on Monday. But relevant data in the US won't be released until Thursday, with the release of Retail Sales. In January, US consumer spending was quite sluggish that resulted in an unexpected drop in Retail Sales, down 0.8% monthly basis. Expectations are of a recovery in February, as market expectations are of a 0.5% grow.  If the reading beats expectations, investors will be more confident on the US recovery, and therefore continue buying the greenback despite the extreme overbought conditions.

On Friday, the US will release its PPI figures, another good market mover. Last January, the Producer Price Index for final demand decreased 0.8%, seasonally adjusted, according the US Bureau of Labor Statistics. Final demand prices moved down 0.2 percent in both December and November. On an unadjusted basis, the index for final demand was unchanged for the 12 months ended in January. Within intermediate demand, the index for processed goods declined 2.8 percent, prices for unprocessed goods dropped 9.4 percent, and the index for services moved down 0.2 percent. Overall,  a pretty disappointing reading. For the February reading, markets expectations are of a 0.2% increase monthly basis, and a 0.1% increase from a year ago. Those numbers will be still considered weak, and it will take an upward surprise to trigger a dollar run.

Anyway, the case for a bullish dollar has been established this week, and the American currency is likely to continue advancing, with more room to move against commodity currencies than against the EUR and the JPY.