Press Release: Dollar Vulnerable to Rebound in Sentiment on Firmer US Growth Hopes

The US Dollar may be vulnerable if improving US data lifts hopes for a firmer recovery in the world’s largest economy, driving a rebound in risk sentiment.

Talking Points

• Euro Crisis Cues Sought as Merkel Meets with Draghi, Italy and Spain Sell Bonds
• Dollar May Decline as Firmer US Economic Data Stocks Risk Appetite Recovery

A lackluster European economic data docket will keep investors’ eyes on Eurozone debt crisis management efforts. A meeting between German Chancellor Angela Markel and ECB President Mario Draghi is likely to warrant particular attention. No press briefing is scheduled but traders will keep a close eye on any sideline commentary.

German and Dutch Finance Ministers Wolfgang Schaeuble and Jan Kees de Jager are also due to discuss the crisis with their perennially euro-skeptic Finnish counterpart Jutta Urpilainen. Finally, Spain and Italy are due to tap the bond markets. Madrid will sell 77- and 168-day bills while Rome offers up 2014 zero-coupon paper as well as 2016 and 2021 inflation-linked bonds. Investors will look to average yields and bid-to-cover readings for signs of funding stress.

Later in the session, the spotlight turns to the US calendar, with September’s US Consumer Confidence reading and the Richmond Fed Manufacturing Indexon tap. Improvements are being forecast on both fronts. US data has increasingly outperformed expectations over recent weeks (according to data compiled by Citigroup). More of the same this time around may underpin risk appetite trends amid hopes that a firmer recovery in the US will offset a recession in Europe and a slowdown in Asia, weighing broadly on the greenback.

With that in mind, yesterday’s better-than-expected Dallas Fed print passed unnoticed, so follow-through may well prove absent again.Separately, Philadelphia Fed President Charles Plosser will give a speech on the economic outlook, though with renewed easing already underway it is unclear how much market-moving potential the remarks will carry. S&P 500 stock index futures are pointing modestly higher, signaling a cautiously risk-on disposition heading into the opening bell in Europe.

Asia Session: What Happened

Euro Session: What to Expect

Critical Levels

— Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya‘s e-mail distribution list, send a note with subject line “Distribution List” to ispivak@dailyfx.com

This article was provided by DailyFX.com.