US Dollar has issues breaking down the bearish wall

NEW YORK (January 19) The US Dollar (USD) consolidates with lower highs and higher lows after the volatility pickup earlier this week. Traders are left clueless ahead of the first US Federal Reserve meeting to be held next week. Although it becomes clear no rate cut will take place, traders have only delayed their rate-cut expectations until May, (from March), which makes it difficult for the Greenback to rally substantially. 

On the economic front, there is only one element that might push the US Dollar in either way, which is the University of Michigan Consumer Sentiment Index for January, together with inflation expectations. As seen earlier this week with some soft indicators like the NY Empire Manufacturing Index and the Philadelphia Manufacturing number all remaining very weak, a contraction in the Michigan Sentiment number could make traders push forward March again for an initial rate cut from the Fed. 

Daily digest market movers: Michigan in the spotlight

• Fresh US air strikes took place against Houthi rebels on Thursday evening. 
• The Senate’s stopgap funding bill has had enough votes to pass and is now making its way to the House. 
• Near 15:00 GMT the University of Michigan will release its numbers:
• The Consumer Sentiment Index for January is expected to head from 69.7 to 70. Analysts are seeing lowest at 66 and highest estimate at 72.5. 
• Any number above 72.5 will trigger an ample amount of US Dollar strength, while any print below 66 will be good for substantial US Dollar weakness.
• Inflation expectations are expected to head from 2.9% to 3.0%.
• Equity markets have shown resilience and have rebounded quite a lot. European equities are nearly erasing all incurred losses from this week and might head to a flat close for this week’s performance should the current gains be extended into the European close on Friday. US equities see the Dow Jones nearly paring back losses from earlier this week while the Nasdaq is already ahead of that option and is firmly in the green for this week’s close. 
• The CME Group’s FedWatch Tool shows that markets are pricing in a 97.4% chance that the Federal Reserve will keep interest rates unchanged at its January 31 meeting. Around 2.6% expect the first cut already to take place. 
• The benchmark 10-year US Treasury Note remains steady at 4.13%, making it a five-day winning streak. 

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