The US dollar has experienced an abysmal week at the end of March and enters April with a bias that can be defined as bearish. But does it mean that the currency is going to extend its decline further?
The greenback recoiled after the dovish comments from Janet Yellen, Chairwoman of the Federal Reserve. The positive employment data attempted to rescue the currency but failed, and the dollar ended the week on a weak footing. It suggests that macroeconomic indicators are currently overshadowed by the outlook for Fed’s monetary policy.
So happens, that there will be a couple of important events that may change or reinforce the current dovish sentiment. For starters, the Fed will release minutes of its latest policy meeting on Wednesday. Additionally, Janet Yellen, whose words shook markets last week, is going to speak again this week, though her speech is scheduled on Friday, meaning that it will not influence markets for the major part of the week. Still, Yellen’s remarks can certainly be important in defining dollar’s behavior in April.
As it was mentioned, macroeconomic data has limited importance for the dollar as of now. Besides, this week is rather light on reports from the United States. Perhaps, the most important piece of information should be considered the service sector data from Institute for Supply Management. It is scheduled for Tuesday and is expected to show a slight improvement of the non-manufacturing Purchasing Mangersâ Index from 53.4 to 54.1 in March.
Of course, the US currency can also react to news outside of the United States. The greenback is still considered to be a safe currency, therefore bad news from abroad should be good news for the dollar. Talking about world news, the International Monetary Fund is going to release reports on the global economy. If they are pessimistic (and it is certainly possible) then the dollar is likely to strengthen.
So what do analysts expect of the US dollar in the near future? To tell the truth, they are reluctant to give certain directions as the futures of the currency is unclear. Yes, the Fed seems to be dovish, but so do other central banks. It is hard to predict how the greenback will behave in such an environment. Therefore, DailyFX is neutral on the dollar. Forex Crunch is neutral on most USD pairs as well with the exception of USD/JPY (on which it is bearish).
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