The US dollar seemed to await Yellen’s speech earlier this week, as traders looked closely for any hint of a rate hike in the first half of 2017. Indeed, FED’s chair said that it would be wise to raise rates soon, which means that each relevant data release will be crucial from now until the next FOMC meeting in March. In terms of data, both retail sales and inflation from the US surprised to the upside, but neither of these helped the dollar. This week, the crucial event is on Wednesday as minutes released from the most recent FOMC meeting will shed more light on a potential hike in March and this could have a significant impact on financial markets.
FOMC minutes (7.00pm GMT)
The dollar retreated last week despite hawkish comments from Janet Yellen and solid data from the US economy. Interestingly, this happened in an environment of rising expectations for a rate hike as soon as March. The probability of a rate hike has now risen close to 50%, though the minutes may have a significant impact on this. Traders will be looking at the FOMC minutes for hints of that the Fed may be willing to raise rates soon, and as such the dollar could finally pare its recent losses.
Macroeconomic data: PMIs (Tuesday), Germany IFO (Wednesday, 9.00am GMT), University of Michigan Consumer Sentiment (Friday, 3.00pm GMT)
The upcoming week will bring 2nd tier data from the major economies. In Europe, the biggest focus will be on the PMIs as the EU economy seems to be getting hotter. Another solid streak of data may lead to more hawkish ECB rhetoric and in turn, could support the euro. Meanwhile In the US, the headline figure will be the University of Michigan Consumer Sentiment. The initial print was disappointing so it’s worth looking if the final data confirms a deterioration in consumer sentiment due to protests against some controversial decisions taken by Donald Trump.
Donald Trump’s policy (whole week)
Donald Trump’s presidency brings a lot of surprises almost each week. However, we are finally hearing more on the long-awaited tax plan. Although details remain scarce, Trump’s indication of a “fantastic tax plan” was sufficient to spur another leg of rally on Wall Street. While a “tax plan rollout” is not expected this week, investors will be looking for any hints of what it may consists of as stakes for major markets (US500, USDJPY, GOLD) are huge.