According to Richard Franulovich, head of FX strategy at Westpac, the cratering volatility environment and the strong prospects of a trade war truce are not conducive to USD gains but the data portrays an economy that is rebounding in February.

“Rebounding momentum is apparent on many fronts (13yr highs in the new orders index of the Feb services ISM a notable example) but is uneven (2yr lows in the manufacturing ISM a case in point), underscoring the lingering drag from trade tariffs. Continuing dovish signals from a range of G10 central banks including the ECB, the BoC and the RBA limit the downside for the USD that would have surely transpired thanks to Fed patience. We suspect there is one more hike from the Fed this year and that could prove to be a meaningful catalyst for USD upside, given that rates markets price in a 45% chance of a Fed cut by mid-2020, but that won’t be a story until well into H2 2019.”