Risk Trends and Monetary Policy Will Keep the FX Markets Moving This Week

Talking Points:

• The Dollar notched a record run in January as the Fed decision and US 4Q GDP maintained hike expectations

• Ahead, risk trends will be a critical read with high profile technical levels for SPX and Yen pairs

• While there will be event risk for Fed cues, the RBA is arguably the most pressing docket item

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Both the S&P 500 and USDollar ended the week and month by holding course on their respective long-term bull trends. A relatively hawkish bearing from the Fed has proven a robust driver for the Dollar - especially after this past week's FOMC tone, steady US GDP read and hawkish rhetoric from a range of Fed officials. However, how much more extreme can the scales tip in the Dollar's favor? NFPs and the Fed's preferred inflation read are due this week, but it may be the Greenback's peers that are more market moving. In particular, the RBA decision finds the market pricing in a 65 percent probability of a rate cut at its Tuesday meeting. Further, the more extreme the central bank divergence is, the more likely it is we make the jump to general 'risk trends'. With the S&P 500 and Yen crosses positioned for breaks, will investors finally take the opportunity for a turn? We discuss catalysts and themes for next week in the weekend Trading Video.

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