US Dollar Week Ahead, Retail Sales in Focus but Debt Ceiling to Dominate Headlines
US Dollar Playbook
DERBYSHIRE GB / May 14 - This is the US Dollar Forex Playbook and is intended to be used as a guide to aid in your trade planning.
DXY weakened in April, holding onto the losses from March
Three US banks failed in March 2023, sparking speculation that the Fed would pivot away from its hawkish monetary policy. The DXY lost almost 1% in April as investors moved into riskier assets.
DXY gains this month, climbing back above the 50 day average and heading for 103
May began with the failure of First Republic Bank, which was sold to JPMorgan Chase after a rescue deal in March failed to stabilise the stock. A few days later, the Federal Reserve made its tenth consecutive hike, setting interest rates to 5.25%. However, the Fed also signalled that it would pause and assess the economy before making any further hikes. The statement also noted that the banking system is strong.
In the past week, attention has focused on the looming debt ceiling deadline of June 1st. Treasury Secretary Janet Yellen has warned that the government will run out of money to pay its bills on that date if Congress does not raise the debt ceiling. Republicans have said they are willing to raise the debt ceiling, but only if Democrats agree to cut spending. As of this writing, it is unclear whether Congress will be able to reach an agreement before the deadline.
Retail Sales In focus for the week ahead
During the upcoming week, market participants will be looking for any new information that may indicate a breakthrough in negotiations to raise the debt ceiling. On Tuesday, the release of retail sales data will be in focus, as a stronger reading would suggest that the economy is still growing too quickly, which could lead to further interest rate hikes from the Federal Reserve.
With regards to interest rates, the CME FedWatch tool indicates an 85% chance of a hold in June then climbing odds at 30% (previous 15%) of a 0.25% cut in July.
Tuesday, May 16th US Retail Sales
0.8% expected; -1.0% previous
Thursday, May 18th US Unemployment Claims
251K expected; 264K previous
Friday, May 5th US Unemployment Rate
3.6% expected; 3.5% previous
Friday, May 19th Fed Chair Powell Speech
Participate in a panel discussion titled "Perspectives on Monetary Policy" at the Thomas Laubach Research Conference, in Washington DC.
The short term forecast for the US Dollar is to remain above the 50 day average of $102 unless an agreement is made to raise the debt ceiling without restrictions.
Gavin Pearson
Retail trader since 2008
Specialises in forex G7 currencies
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