USD Direction Hinges on Confidence Data and Fed Speeches, Says TD Securities
TD Securities warns that upcoming U.S. consumer and business confidence readings combined with scheduled Federal Reserve speeches will be the primary drivers of USD volatility and direction through 2025. Key confidence indicators include the Conference Board Consumer Confidence Index, University of Michigan Consumer Sentiment Index, and ISM Manufacturing and Services PMIs. Recent quarterly readings were mixed (Consumer Confidence fell to 102.5; Consumer Sentiment 78.8; ISM Manufacturing rose to 50.3; ISM Services 53.4), suggesting divergent signals between demand-side softness and manufacturing resilience. Fed communication—especially comments on inflation (Core PCE, CPI), labor market (unemployment, wage growth) and growth metrics—will shape rate expectations. TD Securities notes market reactions typically follow data releases, then Fed remarks for context, prompting adjustments in positioning and potential rapid price moves. Traders are advised to use scenario-based plans (hawkish = dollar rally; dovish = dollar weakness; mixed = range-bound), tighten risk management ahead of catalysts, and monitor cross-currency relationships (EUR/USD, USD/JPY) and global policy divergence. The analysis highlights implications for emerging markets with dollar-denominated debt and trade impacts from dollar moves. The outlook is that combined confidence data and Fed commentary will create trading opportunities and elevated short-term volatility while longer-term currency trends depend on sustained economic and policy signals.
Neutral
The report points to mixed economic signals and data-dependent Fed communications rather than a clear directional shock. Confidence metrics showed divergence—consumer sentiment softened while ISM PMIs improved—so near-term USD movement depends on how forthcoming data and Fed speeches are interpreted. Historically, hawkish Fed messaging or stronger-than-expected confidence readings have produced dollar rallies; dovish tones or weak data have trimmed USD strength. Given this balance, the likely market reaction is heightened volatility and scenario-driven trading rather than a sustained bullish or bearish trend. Short term: traders should expect rapid moves around data releases and speeches, creating trading opportunities and elevated risk. Long term: sustained dollar direction will require persistent trends in inflation, labor market and growth indicators; without that, USD is likely to trade within ranges as markets price incremental information. Similar past episodes (e.g., 2023 confidence-driven dollar rallies and 2024 hawkish Fed messaging) produced short-lived strong moves followed by periods of consolidation, supporting a neutral classification.