US Dollar Looks to Earnings Docket, FOMC Minutes for Direction

The US Dollar is looking to the day’s fourth-quarter earnings results and minutes from the March Federal Reserve monetary policy meeting for direction cues.

Talking Points

US Dollar Looks to Earnings Docket, FOMC Minutes for Direction Cues
Italian Bill Sale Headlines Otherwise Quiet European Economic Calendar
Australian Dollar Gains as Chinese Import Growth Soars Past Forecasts

The spotlight turns to the fourth-quarter corporate earnings calendar. Reports from alcohol beverage maker Constellation Brands Inc and discount retailer Family Dollar StoresInc may offer insight on the health of the US consumer against the backdrop of fiscal austerity following January’s payroll tax hike and the recent onset of “sequester” spending cuts. Industrial and construction supplies provider Fastenal Co will be looked upon as a gauge of overall global growth trends. Encouraging cues may boost risk appetite and weigh on the US Dollar.

The greenback may find added selling pressure as the Federal Reserve releases minutes from the March meeting of the policy-setting FOMC committee. A dovish tone in the wake of last week’s disappointing ISM and NFP data is likely to reinforce the view that Ben Bernanke and company are in no hurry to slow their aggressive stimulus efforts, driving dilution fears and weighing on the benchmark US currency. We remain long EURUSD.

The economic calendar is quiet in European trading hours, offering only a small helping of second-tier fundamental news flow. Italy is due to sell 11 billion in 3- and 12-month bills, with traders keeping an eye on average yield and bid-to-cove readings for signs of funding stress. The recent drop in borrowing costs for the Eurozone’s third-largest economy suggests Rome should be able to place short-tenor debt without too much trouble however.

Forex markets are in consolidation mode overnight, with most major currencies trading little-changed. The Australian Dollar is narrowly outperforming in the wake of China’s Trade Balance figures. The report showed that imports soared 14.1 percent in the year to March compared with expectations of a 6 percent increase. China is Australia’s largest trading partner, and traders appeared to interpret the jump in imports as indicative of buoyant Chinese demand for overseas goods.

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