USD: Data obstacles this week – ING

The US Dollar (USD) found some support last week after a very weak start to March. The Federal Reserve's reiterated cautiousness on rate cuts has likely prevented further bearish sentiment from accumulating on the dollar. Reports suggesting some countries may be exempt from the first protectionism wave are helping risk sentiment and are modestly weighing on the dollar this morning, ING's FX analyst Francesco Pesole notes.

DXY can potentially restabilise around 104

"At the same time, there are key data hurdles on the path to the dollar’s re-appreciation. As things stand now, consumer confidence is probably the single most important input for FX, so tomorrow’s Conference Board survey results are the key event of the week. Our call is 93, close to consensus, but activity indicators have substantially undershot expectations of late, so we still see the release as mostly a downside risk for USD. Later in the week, we’ll also look at core PCE for February, which is expected at 0.3% month-on-month. That should not tilt the balance in any specific direction when it comes to Fed expectations but can be read as a mildly hawkish signal and dollar positive."

"Russia-Ukraine (indirect) peace talks will also remain on investors’ radars. The latest developments suggest some improvement but provide no clear indication that an immediate ceasefire is on the cards. Market optimism on that, which showed through some European FX underperformance, risks being scaled a bit further unless there is tangible progress in this week’s talks."

"We retain a bullish bias on the dollar for the coming weeks. But short-term noise remains likely, and the dollar may soften in the first half of this week on some soft PMIs (today) and consumer confidence disappointment (tomorrow) before recovering into the PCE release on Friday, with DXY potentially restabilising around 104."