The U.S. dollar remained near one-week lows as market participants prepared for a string of U.S. economic releases that could shape the currency's immediate trajectory, according to analysts at Bank of America Securities.
At 09:00 ET (14:00 GMT) the Dollar Index - which tracks the greenback against a basket of six other currencies - was largely unchanged at 96.700, a level last observed at the end of January.
In a note dated Feb. 9, Bank of America Securities said the foreign exchange market has entered the data window with a mildly bearish bias toward the U.S. dollar.
The U.S. jobs report, which had been delayed by a short-lived three-day federal government shutdown that ended last Tuesday, was postponed into the week and is expected on Wednesday to show the U.S. economy added 70,000 roles in January, down from 50,000 in the prior month.
Also on the calendar, the Labor Department's headline consumer price index for the 12 months to January is projected to decelerate to 2.5% from 2.7% in December, with the CPI print due on Friday.
U.S. retail sales for December, released earlier on Tuesday, arrived below expectations: sales were flat on the month instead of the 0.4% increase that had been expected.
Bank of America analysts warned that below-consensus jobs and retail sales outcomes could trigger further immediate downside in the dollar. At the same time, they said a firmer-than-expected CPI would likely constrain the extent of any near-term dollar weakening.
The bank added that after the dollar established a new low on Feb. 4, and absent fresh market-moving catalysts, it expects more two-sided price action in the U.S. currency until the next Federal Reserve Chair provides additional guidance.
Key takeaways
- The Dollar Index was near 96.700 at 09:00 ET (14:00 GMT), close to levels seen at the end of January.
- Market participants are watching three major data points this week: the delayed jobs report, the December retail sales print, and January's CPI.
- Bank of America Securities views the market as slightly biased toward a weaker dollar into the data, but notes a stronger CPI would limit dollar downside.
Impacted sectors
- Foreign exchange markets - direct impact on currency valuation and trading strategies.
- Consumer-facing sectors - retail sales figures reflect household spending trends.
- Labor market analysis - payroll changes inform policymakers and markets.
Risks and uncertainties
- Below-consensus jobs and retail sales prints could generate more immediate USD weakness, affecting currency traders and exporters.
- A firmer-than-expected CPI could cap USD declines and alter market positioning across rates-sensitive assets.
- In the absence of new catalysts, two-sided dollar price action is likely to persist until clearer guidance from the next Fed Chair becomes available.