US economic deterioration a risk for the dollar
- The strength in the USD in recent weeks belies what appears to be a run of poor economic reports pointing to a significant slowdown in Q1, possible stalling.
- The US trade data suggest that US exporters have suffered a significant slowdown, as bad, or even worse than many other countries.
- US employment indicators show that tightness in the labor market appears to have eased in recent months.
- The risks appear somewhat tilted towards a softer than expected payrolls report on Friday.
- The Fed has more capacity to ease and the hurdle for a hike has got much higher.
- On the eve of the ECB meeting, where the EUR appears to have fallen in anticipation of weaker staff projections, and some possible tweaks towards easing, it is worth noting that risk metrics have moved in favour of the EUR recently.