USD recovers strength and could get stronger if data meets forecasts

Today's Highlights

• USD recovers strength and could get stronger if data meets forecasts

• Sterling slipped but is seen as ‘undervalued’

• Eurozone Industrial and Consumer Confidence data could weaken Euro today

Current Market Overview

As a very proud England Rugby fan, can I just say, I loved the inventiveness of the Italian coaches on Sunday. Seeing a bunch of players asking the ref about the rules in the middle of an international match was so amusing. Perhaps I’d be a little less amused if England had lost, but three out of three is enough to make any patriot happy.

The US Dollar regained a little strength as last week came to a close. The uncertain tone of the Federal Reserve Minutes was replaced with a much more hawkish tone from some of the Federal Open Market Committee (FOMC) members and that gave US Dollar traders a reason to buy again. However, the USD still looks overvalued on some measures and that is likely to cause dips in its value whenever the opportunity arises. The red herring of the week will be President Trump’s speech to both houses. We expect very little on the tax and spending front, but a fair amount of posturing is pretty inevitable in front of the two houses that his party controls.

This afternoon brings what should be positive US Durable Goods Orders; widely thought to signify positive economic sentiment. Tuesday will being the second release of US Gross Domestic Product (GDP) growth and that is expected to show an upward revision. The Beige Book, due for release on Wednesday, is expected to be rather upbeat too. USD strength will ensue if these forecasts are reliable.

The data diary this week offers all manner of events, but only a few are likely to move the market. Today’s little beauties are the Eurozone Industrial and Consumer Confidence Indices. Whilst industrial sentiment is expected to have improved, consumer confidence remains in the doldrums. That is perhaps unsurprising when the unemployment rate is still grotesquely high. The Euro has weakened a little over the last few days and could do so again if this data is poor.

Overnight, we’ll get the UK Consumer Confidence Index. The pattern lately has been for poor forecasts being met by positive data. If that plays out with this data, Sterling has plenty of room to strengthen and many analysts are reporting that they see the Pound as significantly undervalued at the moment. I tend to agree, in spite of the Brexit mist. 

And there are some very red faces today after mixing up the envelopes at the Oscars. It caused Warren Beatty to announce the wrong winner in the Best Movie category at the Oscars ceremony.  I am not an Oscars watcher (far to self-aggrandising for my tastes) but, of the reports I have read, the best comment of the night was from Jimmy Kimmel who said, “I want to say thank you to President Trump... remember last year when it seemed the Oscars were racist?”