Summary:

• USD recoups earlier losses
• Fed’s Bullard says US economy is looking very good
• Chicago PMI of 0.12 misses forecasts

The US dollar had begun the trading week on the back foot with declines seen against many of its major peers but as the session has worn on, there has been a decent recovery. The Buck is now back in the middle of its range after a fairly steady bid in the last couple of hours with only the crypto markets showing a significant rise against the USD on the day. 

 The USD is now trading a little higher on the day on balance after earlier coming under pressure. Source: xStation

Looking at fundamental developments today which could be seen to support this recovery in the US dollar, some positive comments from Bullard are worth mentioning. The Fed member stated that he believed the US economy is looking “very good” as well as making the following comments:

• Not concerned by stress levels following market selloff
• The promise of tax reform fires up investment
• A little concerned Fed may hike too fast
• Discussion with CEOs has made him optimistic that the tax reform could lead to an investment bump

Overall the tone of these remarks is clearly positive and upbeat. It’s a quiet day on the data front with the Chicago national activity index and the new home sales figures the only real economic releases of note. A print of +0.12 was below the 0.20 expected but this miss isn’t quite so bad when viewed in the context of a sizable upwards revision to the prior print which now stands at +0.27 compared to +0.14 beforehand.

 

 The Chicago Fed national activity index has dropped fairly sharply and this could be a slight concern going forward. Source: XTB Macrobond

The GBPUSD had earlier been on the rise thanks to an upbeat pound on higher hopes of a May hike and also the USD weakness. The market had rallied to its highest level in almost 2 weeks above 1.40 but the subsequent sell-off leaves the D1 candle looking a little ugly. A rising trendline going back to mid-December looks set for another retest and a break below there could lead to a sustained move lower. 

 GBPUSD has reversed its early gains and a break below the rising trendline could see further downside. Source: xStation