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USD Talking Points:

  • The US Dollar rally is set to catch its breath today with the DXY declining -0.4% after eight days of straight gains as key event risks lurk
  • USD currency traders eye Federal Reserve official speeches, a possible government funding deal that would prevent another US government shutdown, and any developments out of US-China trade talks

The recent rally in the US Dollar is finally taking a pause after 8 days of straight gains with the DXY US Dollar Index stumbling -0.4% lower to the $96.70 level. America’s currency has been on a tear since the start of the month as international economies falter while the United States’ seems to be holding up relatively well. In response, the USD is up over +1% so far this month despite the recent dovish pivot in Fed policy.

US DOLLAR INDEX PRICE CHART: 120-MINUTE TIME FRAME (FEBRUARY 01, 2019 TO FEBRUARY 12, 2019)

DXY US Dollar Index Currency Price Chart February 2019

That being said, here are the top 3 things USD currency traders will have their eyes on the rest of the week hoping to gauge the currency’s next direction:

1. Government Shutdown or Budget Resolution

Last night, news broke out that a bipartisan budget deal was reached between congressional leaders that will prevent another US government shutdown. If passed by the House and Senate, the funding bill will be sent to President Trump’s desk for him to sign. However, Trump expressed disappointment saying “I am extremely unhappy with what the democrats have given us” when told the federal spending deal earmarked $1.4 billion for his border wall – far shy of his $5.5 billion demand. The President refused to commit to signing the bill, but the February 15 deadline to prevent another government shutdown is quickly approaching.

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2. US-China Trade Talks Resume in Beijing

Treasury Secretary Stephen Mnuchin and a team of US trade officials arrived in China earlier today to continue discussions over the Sino-American trade war. Talks this round are evidently touching on topics previously deemed off-limit by the Chinese such as the hacking of US companies and theft of intellectual property. Although not much is expected in terms of finalizing a deal, traders are closely watching headlines for any positive developments – whether it be a breakthrough on key issues or an official extension of the March 1 tariff deadline so trade talks can continue.

Take a look at IG’s real-time Client Sentiment tracker to see the bullish and bearish biases of traders.

3. Fed-speak on Tap

Following tomorrow’s release of January CPI data which is widely expected to show muted signs of inflation, Federal Reserve Presidents Mester and Bostic are due to speak and may provide forex markets with the latest reading on the Fed’s economic and monetary policy outlook. Traders will also listen for central bankers’ comment on adverse effects that international risks like slowing Eurozone GDP growth or Brexit could have on the US economy.

For a full list of upcoming economic data releases and events on deck for this week, be sure to check out the DailyFX Economic Calendar!

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Written by Rich Dvorak, Junior Analyst for DailyFX

Follow on Twitter @RichDvorakFX