Improved market mood this morning and dovish comments from Fed Chairman Powell last week are weighing on the dollar as we start the first full week of 2019. With most people back to work now, including U.K. lawmakers, the week is expected to be a return to the volatility seen at the end of 2018.

U.S. PMI dips dollar; CPI Friday

The dollar started the day off on a lower note as risk-on mood permeated the markets and then a worse-than-expected ISM non-manufacturing purchasing manager’s index did little to help the greenback.

The non-manufacturing PMI for December was 57.6 compared to estimates of 59.0. The index is at a five-month low.

The EUR/USD pair is up around 1.146 and GBP.USD spiked to 1.278 before dropping lower to 1.276.

The U.S. data front is relatively light this week until Friday, when the consumer price index for December is due.

The inflation measurement is expected to slow to 2.1% from 2.2% excluding food and energy, but the measurements should remain steady.

The dollar could also shift this week from the results of the U.S.-China trade talks that began today in Beijing.

Fed week

After Federal Reserve Chairman Jerome Powell made some dovish comments last week on the Fed’s flexibility on interest rate hikes going into 2019, there will be more focus on two Fed-related events later this week.

The minutes from the FOMC meeting on Dec. 18-19 will be released Wednesday, with many investors likely to dissect any discussion of the revised 2019 rate hike outlook.

Then on Thursday, Powell will speak to the Economic Club of Washington, D.C. We’ll see if he makes any market-moving remarks like last week or sticks to surface-level commentary.

Bank of Canada decision Wednesday

The Bank of Canada is set to release its interest rate decision on Wednesday and, depending on the accompanying monetary policy report, it could impact the USD/CAD pair.

The BoC is expected to hold rates steady at 1.75%, but commentary on geopolitical factors like global trade and the United States-Mexico-Canada Agreement could move the loonie.

Brexit back in the spotlight

Brexit took a brief hiatus from dominating the currency markets, but with a U.K. parliament vote set for Jan. 15, this week will likely mean the sterling will rise and fall with the headlines.

Monday morning, the pound was benefitting from a risk-on mood in the markets, with GBP/USD reaching 1.278. But reports of more preparations for a no-deal outcome has the pair falling to 1.275.

There is one piece of economic data that could move the pair instead of the Brexit headlines. The U.K. GDP for December is set to be released on Friday. It’s expected to show continued steady growth of 0.1%.