Dollar Seeking Direction As U.S. Equities Continue To Fly

As we move towards the close of a week that’s seen quite a few drivers come into markets, it’s time for traders to start trying to look around-the-corner to see which themes may be driving price action in the week ahead. Next week’s economic docket is relatively light. The highlight for macro themes will likely be the FOMC Meeting Minutes from the Fed’s February meeting to be released on Wednesday. Below, we dive into U.S. equities and the U.S. Dollar.

U.S. Stocks: To Infinity and Beyond?

U.S. Stock prices have continued to run-higher, even with the build of risk factors in the macro backdrop. S&P futures have moved-up by a whopping 16.2% from the lows of election night, and so far in 2017 are up by 5%. And while U.S. Stock prices are still at historically ‘expensive’ levels, the net-impact of this week’s two-day Humphrey-Hawkins testimony was even-higher stock prices; so the one major risk factor to continued gains in equities prices – a higher probability of faster rate hikes from the Fed – does not appear to be a limiting factor at the moment.

As for drivers? This is likely quite a bit of hope with a good deal of excitement. A lot of that hope seems to be pinned towards political factors and the prospect of a massive tax cut plan in the United States along with the hope for increased infrastructure spending and growth programs down-the-road. This is likely one of the reasons why so much of the financial media has become fixated on the Twitter account of President Trump, and it does bring up what is looking to be an interesting tango in the months ahead.

Given next week’s expectedly quiet backdrop, this would be a good opportunity to gauge market sentiment around this theme. If we do see a pullback in U.S. equity prices next week, this can open the door to a buying opportunity. If we don’t – then fears of ‘exuberance’ and markets getting ahead of themselves should denominate a quiet stance in such venues.

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Disclosure: See what live coverage is scheduled to cover key event risk for the FX and capital markets on the DailyFX Webinar Calendar. See the schedule of upcoming webinars and join us LIVE to follow the financial markets! For an a more in-depth discussion on gold and other key setups in play heading into next week, review Friday’s DailyFX Roundtable: BoJ, Fed and BoE Preview.

- See the DailyFX Economic Calendar and see what live coverage for key event risk impacting FX markets is scheduled for the coming days on the DailyFX Webinar Calendar.

See the DailyFX Q1’17 and 2017 Trade of the Year Forecasts

- See the DailyFX Economic Calendar for today's data.

Webinar Schedule

Mondays, 7:30 EDT/12:30 GMT: FX Week Ahead: Strategy for Major Event Risk

Wednesdays, 6:00 EDT/11:00 GMT: Trading Q&A

Thursdays, 7:30 EDT/11:00 GMT: Central Bank Weekly

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