Markets have gone sideways and the dollar has been mixed. Will we get some clarity?
Here is their view, courtesy of eFXnews:
USD bulls had plenty to chew on, with several Fed speakers during the week, FOMC Minutes and comments from Treasury Secretary Mnuchin. The Minutes kept a March hike on the table, but also highlighted that most participants thought that “some time would likely be required for the outlook to become clearer.”
Mnuchin, for his part was optimistic on the outlook for growth, and on swift progress on tax reform, also stating that “for longer-term purposes, an appreciation of the dollar is a good thing”. He did however downplay expectations for a quick pick-up in growth. The USD was unimpressed, with the DXY unwinding its gains in an echo of last week’s behavior. Focus remains squarely on next week’s communication from the administration and the Fed.
It feels like it has been a very long time coming, but markets will finally hear from President Trump at next week’s address to Congress. Anticipation is running high, and investors will be looking for clarity on the new administrations agenda.
As we argued earlier this week, if fiscal progress is delivered, rates and the USD should move higher. The risk is that we do not get the level of detail on policies markets are waiting for.
Speeches from Chair Yellen and Vice Chair Fisher next Friday will also be closely watched. As the last communication before the March blackout period begins, the speeches will be the Fed’s last opportunity to push March pricing higher, if indeed they want to.
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