DailyFX
Dollar Holds its Range as Traders Look to SPX and NFPs as Loaded Catalysts
John Kicklighter

DailyFX.com -

Talking Points:

  • Dollar Holds its Range as Traders Look to SPX and NFPs as Loaded Catalysts

  • Euro: Is There More Easing from a Well-Priced ECB Stimulus Program?

  • Australian Dollar Refuses to Break 0.79 Despite RBA Hold, Data, China Improvement

Dollar Holds its Range as Traders Look to SPX and NFPs as Loaded Catalysts

Event risk to start this week has not been concentrated enough to drive the Dollar from its five-week range. Monday’s round of economic indicators was the most potent hit. Manufacturing and construction activity reports bowed to the personal income and spending data for January. Spending eased, but adjusted for inflation driven by items like cheaper gas prices, this foundation for GDP actually grew (0.3 percent). More interesting from this mix was the income component which reinforces the earnings figures seen in the January NFPs data run with another 0.3 percent increase. As for the inflation statistics that are derived from this consumer data – the Fed’s preferred PCE measures – the core figure held steady at 1.3 percent. Moving forward, the focus for Dollar traders should remain on two particular themes: counterpart strength and anticipation for Friday’s labor data. With the ECB set to activate its QE program this week, the PBoC surprising with a cut over the weekend and other major counterparts keeping a weak path; the Dollar looks slightly more attractive each day. But that marginal gain in popularity will be dampened as traders nervously await the Bureau of Labor Statistics to report February jobs numbers.

Euro: Is There More Easing from a Well-Priced ECB Stimulus Program?

The Euro faces a similar quandary to the Dollar: how efficiently have the markets priced in future policy changes? For the Greenback, the market is trying to price the probability and impact of a rate hike sometime ‘mid-2015’. For the Euro, the question is how much depreciation should be wrung from the introduction of a QE program. The ECB confirmed an open stimulus program at its last meeting and speculation of its arrival drove the currency down well in advance of the approval. So, how much further does the market run on established trajectories? That depends on the bearings of its counterparts, the details (particularly triggers for upgrade) of the program and the revival of other factors like Greece.

Australian Dollar Refuses to Break 0.79 Despite RBA Hold, Data, China Improvement

A range of fundamental event risk these past 48 hours has contributed to a measurable improvement in the Australian Dollar’s prospects. And yet, AUDUSD has proven incapable of returning to 0.7900 – much less overtake it. An unexpected hold from the RBA led some doves to shake some of their bearish exposure while 4Q GDP figures that were generally inline with a moderate trend of expansion offer a foundation for the carry currency. Meanwhile, better than expected Chinese PMI figures and easing by the PBoC engendered limited indirect strength.

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