Strong data, rate cut bets bolstered the Dollar (again)

Another positive set of results in US key indicators lent oxygen to the upside bias in the greenback and underpinned the tighter-for-longer narrative around the Fed. The same view seems to emerge around the ECB, where the Accounts of the December event left no room for any guess on the timing of interest rate cuts.

Here is what you need to know on Friday, January 19:

Another positive session for the greenback allowed the USD Index (DXY) to navigate the upper end of the recent range in the 103.60 region amidst modest gains, while auspicious prints from regional manufacturing surveys and firm data from the weekly labour market added to the dwindling sentiment surrounding a Fed’s rate cut in March. On Friday, the preliminary Michigan Consumer Sentiment gauge will take centre stage in the US docket along with Existing Home Sales, TIC Flows, and speeches by FOMC M. Daly (San Francisco) and M. Barr (Board of Governors).

EUR/USD remained on the defensive and flirted once again with yearly lows in the mid-1.0800s on the back of the dollar’s strength, despite the fact that the ECB Accounts made no mention of interest rate cuts. Absent data releases in the euro calendar on Friday, all the attention is expected to be on another speech by President C. Lagarde at the WEF in Davos.

GBP/USD briefly surpassed the 1.2700 barrier, ending Thursday’s session with decent gains despite another positive session in the greenback. Across the Channel, investors are expected to closely follow the release of Retail Sales for the month of December on Friday.

USD/JPY charted a vacillating session on Thursday, ending the day around the 148.00 neighbourhood following Wednesday’s multi-week tops near 148.50. On Friday, all the attention should be around the publication of inflation figures in December, seconded by November’s Tertiary Industry Index.

AUD/USD woke up and rose to the 0.6570 area, although it remained trapped in the multi-week bearish move in place since late December. The Aussie dollar continued to suffer from the buying pressure in the dollar, disheartening domestic labour market readings, fragile Chinese fundamentals, and a lack of upside traction in the commodity universe. There are no data releases scheduled for Down Under at the end of the week.

Both Gold and Silver managed to regain some balance and chart humble gains on Thursday, partially setting aside the recent weakness.

Geopolitical concerns and a weekly draw of US crude oil inventories encouraged the prices of WTI to add to the previous day’s gains and surpass the $74.00 mark per barrel. So far, crude oil has maintained the consolidation theme in place since the beginning of the year.