Will Dollar Direction Be Dictated By This Week's Data?

Relatively mixed on the day, the US dollar was neither stronger nor weaker against the majors as conflicting sentiment helped to keep the greenback in neutrality. On one end of the spectrum, dollar strength was obtained on flight to risk aversion following statements by Chinese officials of further monetary tightening in the country. With liquidity still a concern on carry trades, softness in currencies like the Euro and pound helped to boost dollar enthusiasm, albeit temporarily, throughout the day.

Treasury markets seemed to confirm overall speculation in risk aversion as US 10-year benchmark bond yields continued to pare back in the New York session, falling another 5 basis points to 5.07 percent. However, comparatively bucking the good vibes for the US single currency were less than exemplary results from the economy?s only suggestive report on Monday. According to the most recent housing data, it seems that housing supply is growing against a lack in consumer demand and not higher levels of production. Granted, the notion is already widespread, but today?s existing home sales report lends confirmation to the fact that current state of affairs compares to the worst housing recession in almost 16 years. Ultimately, this is cause for worry as repercussions are sure to follow in softer weaker retail figures (which have already been witnessed) in the world?s largest economy. Subsequently, thinner consumer demand will more than not produce a dovish solution by the Federal Reserve, set to meet this week. Exacerbating dollar negative tones throughout the week is a bevy of bearish results in this week?s schedule of events. As it stands, with consensus estimates to the downside, the dollar may need more than bond yield speculation and equity index good vibes to turn things around.