The Dollar's Fate: A Week of Anticipation and Controversy
Credit Agricole predicts a turbulent week for the dollar, with traders eagerly awaiting significant developments.
But here's the catch: the focus remains on the greenback's rebalancing act. With a trifecta of economic data already revealed last week, traders are now bracing for the aftermath. The question is, will the dollar find its footing or face further challenges?
Credit Agricole's analysts believe the dollar might catch a break, stating, "The 'USD rebalancing' theme will likely dominate next week's narrative." Investors will meticulously analyze the TIC data for December, seeking clues about foreign demand for US Treasuries and stocks. Has the demand cooled down, or is there a shift in global investment trends?
However, the real game-changer could be the upcoming data releases:
- Core PCE deflator data for December: A crucial inflation indicator, it will influence the Fed's future moves.
- February PMIs: Providing insights into economic health, these could impact the dollar's trajectory.
- January FOMC meeting minutes: Any hints of a policy shift will be closely watched.
- SCOTUS verdict on Trump's trade tariffs: A highly anticipated decision with potential market implications.
The Fed's role in the dollar's story is pivotal. Credit Agricole suggests that many Fed-related concerns are already priced into the USD. The currency might stabilize unless near-term data disappoints or the Fed surprises with a dovish turn. But here's where it gets controversial—the bank believes continued foreign investment in US assets is key to the dollar's long-term recovery.
This week, two events outside the regular economic calendar deserve special attention:
- US Treasury TIC Report (December 2025): Scheduled for February 18th, this report is a critical gauge of foreign investors' trust in US debt. In November 2025, foreign holdings hit a staggering $9.36 trillion, even as China's holdings dropped to 2008 levels. But here's a twist—this data only captures China's holdings in US custodians, not the full picture.
China may be purchasing US Treasuries through non-US custodians, with Belgium and Luxembourg potentially playing significant roles. This hidden aspect adds complexity to the dollar's narrative.
- US Supreme Court Decision on Trump's Tariffs: The next hearing is set for February 20th, and a decision could impact markets. Will the court's verdict bring clarity or create more uncertainty?
As the week unfolds, the dollar's journey will be closely watched. Will it rebalance and regain strength, or will external factors and controversial decisions sway its path? Stay tuned, as the financial world eagerly awaits these answers.
