Dollar awaits signals from Powell

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At the beginning of the new trading week, the dollar is under widespread pressure, yielding to the decrease in the yield of treasuries and the interest in risky assets. After the U.S. stocks indexes Asia-Pacific showed a positive trend. The main European futures are also on the rise prior to the official opening.
Tomorrow and Thursday Jerome Powell for the first time as the new fed Chairman will report to congressional committees. Markets are wondering what will be the tone of the Chairman of the Central Bank, and how it will differ from the rhetoric Yellen. Judging by the fighting spirit of the financial markets, investors are waiting for the manifestation of overt “aggression” from Powell, who can really try to sound as neutral as possible, so as not to raise a new wave of volatility in the markets that have not recovered from the sales beginning of the month and remain sensitive to hawkish signals. If so, then the dollar will have no chance for a sustained recovery.
Make adjustments to the universal dynamics of the American currency may be stated in the report on personal consumption expenditures. The PCE index is the preferred tool for the fed in the assessment of inflation and can influence expectations of the players wagering. Improvement will return to the stage of perspective of four increases this year will support demand for the dollar.
In the short term the USD will react to the report on new home sales, which will be published later during today’s trading. In December, the index fell sharply, by almost 10%, and it is logical to see some recovery in sales at the beginning of the year, which may locally have a little support “American”, although the basic tone will continue to define the dynamics of government bond yields and overall interest in risk.
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Sergey Kostenko,
Investment analyst
GLOBAL FX