US Dollar muted with Fed members not seeing eye-to-eye on next steps

NEW YORK (March 25) The US Dollar (USD) is retreating a touch on Monday ahead of the US session in a rather calm week ahead,  with many trading desks and markets across the globe closed on Good Friday. Traders will likely continue to speculate on whether the Fed’s thesis of three cuts for this year is still valid, with a few interesting leading economic indicators and US Gross Domestic Product (GDP) numbers at hand. As if that is not enough, on Good Friday (with thin liquidity and most markets closed), the US will release the Fed’s preferred inflation gauge: the Personal Consumption Expenditures (PCE) Price Index for February. 

On the economic data front, Monday offers a soft opening for the trading week with only US New Home Sales as the data point to trade on. Three US Federal Reserve members are due to make an appearance: Lisa Cook, who is a member of the Board of Governors at the Fed, Chicago Fed President Austan Goolsbee and Atlanta Fed Raphael Bostic, with Bostic repeating his stance for just one cut while Goolsbee rather sees three as best scenario. 

Daily digest market movers: Fed turns into a box match

• The People’s Bank of China (PBoC) fixed its Yuan substantially stronger against the US Dollar, triggering a lower USD/CNH, which, in a domino effect, puts the Greenback on the backfoot. 
• The release of Minutes from the latest Bank of Japan meeting saw equities in Japan plunge as the documents signalled that the BoJ is considering to hike interest rates more than what markets were expecting. 
• This Monday kicks off with New Home Sales data for February at 14:00 GMT. In January, sales rose by 1.5%.
• Three Fed speakers on the docket for this Monday:
  • Atlanta Fed President Raphael Bostic has already spoked and repeated his call for just one rate cut for this year.
  • Chicago Fed President Austan Goolsbee could not be further apart from Bostic, by saying three cuts are the best scenario forward.
  • US Fed Board member Lisa Cook will speak around 14:30 GMT. 
• The US Treasury is set to allocate three fresh bond issuances this Monday:
• A 3-month and a 6-month bill near 15:30 GMT. 
• A 2-year note is expected to be placed at 17:00 GMT. 
• Equities are falling sharply on Monday. Asia indices are down, led by Japan’s Nikkei, which closed off at more than 1% in the red ¡. Europe is following suit, with a negative opening for both the Stoxx 50 and the German Dax, while US Futures are roughly flat.  
• According to the CME Group’s FedWatch Tool, expectations for the Fed’s May 1 meeting are at 89.2% for keeping the fed funds rate unchanged, while chances of a rate cut are at 10.8%.
• The benchmark 10-year US Treasury Note trades around 4.2%, ralying off the low with the high of 4.34% last week as target.

FXStreet