TD Securities’ Global Strategy Team notes that markets now focused on President Trump’s State of the Union and multiple Federal Reserve speakers. The bank expects the Conference Board consumer confidence index to undershoot consensus at 85.5, citing weaker sentiment indicators, volatile equities and higher gasoline prices as headwinds.

Confidence and policy events steer Dollar

"On Tuesday, the majority of the focus will be on President Trump's State of the Union Address at 9pm EST. Ahead of the address, markets are likely to remain choppy as they try to position themselves ahead of the event, with topics focused on the economy, tensions with Iran and the Supreme Court's ruling on the legality of IEEPA. During the day, Goolsbee, Bostic, Waller, Cook, Barkin and Collins are all set to speak."

"For data, the Conference Board confidence index will be the key data release of the day, which we expect to come in below consensus at 85.5. The 2y auction will also be in the afternoon, which could struggle given that yields are at the bottom of their trading range since October."

"We expect a below-consensus rebound in February consumer confidence to 85.5 after it declined sharply to 84.5 in January (cons: 87.0). While some payback is likely in the month, Morning Consult data does not show a significant improvement in sentiment to start February."

"The first half of the month saw volatile moves in equities along with increasing gasoline prices—both negative for confidence. The "labor differential" will be key as it has showed declining job finding expectations, in line with the NY Fed."

"Despite the recent labor market stabilization, hiring has remained subdued, which will keep Fed doves on their toes."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)