Dollar and Euro ahead of a busy weekPosted on Tuesday, February 27 2018 at 4:41 pm GMT+0000
This week, The economic calendar has a number of releases that could spur positioning in the markets, as well as Jerome Powell tonight’s testimony. Another hearing in Congress featuring Powell is on the agenda on Thursday. Those developments will determine the US currency’s short-term direction.
The dollar index is still locked between the 88.20 and 90.60 levels.
Jerome Powell’s first congressional testimony is viewed as the event having the greatest capacity to lead to sharper movements, on the currency markets. But I do not think his speech will carry anything new and I expect to pay tribute to the health and strength of the economy and the need to re-evaluate inflation before accelerating monetary tightening.
In terms of economic releases, in addition to the consumer confidence index the personal consumption expenditures (PCE) price index for January, this being the Fed’s preferred inflation measure, will be also released this week. Positive readings will support the dollar and fixed income markets and affect the equity market negatively.
Draghi was optimist about the European economy and noted the obvious improvement in the various economic data, but at the same time stated that the QE will be retained until inflation rates improves clearly.
In other words, the European economy has entered a new phase in which the Central Bank is moving forward to tighten its monetary policy.
On the other the eurozone is ahead of week full of data releases as well as Sunday’s Italian elections – the outcome of the German SPD’s vote on whether to seal a coalition deal with Chancellor Merkel’s conservatives.
Technically, a rally above 1.2350 is seen as good signal, and the bearish reversal level is at 1.2200, below the latter the way towards 1.2000 and 1.1650 will be opened.