People calling for a rally of the US dollar again got disappointed as USD bears got aggressive with every piece of USD-negative economic data that came in. The Reuters/University of Michigan index of consumer sentiment fell to a 16-year low, and consumer spending rose 0.1% in February, the least in more than a year, after a 0.4% gain in January. Weakness in the greenback is most prominent against the Euro; EUR/USD gained the most in more than two years last week, rallying more than 500 pips, with most gains made over last Tuesday and Wednesday. If EUR/USD breaks above its all-time high of 1.5900, it could next target 1.5950, 1.5990-1.6000.
Contraction of US Economy?
An increasing number of economists are predicting a US recession as job, retail sales and manufacturing data have worsened this year. Theoretically, to qualify as a recession, the economy has to shrink for six straight months. Traders are pricing in a 52% chance the Fed will cut its target rate by a quarter-point to 2% at its meeting on April 30, and the remaining bets are for a half-point cut.
There will be many major economic releases this week, including US ISM manufacturing on Tuesday and US non-farm payrolls on Friday.
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