The U.S. dollar is trading in mixed ranges, mounting a slight comeback after falling to its weakest level overall since the start of March, according to the Bloomberg Dollar Spot Index.
Overview
Indeed, the Buck is showing resilience as stock futures remain higher after the latest jobless claims report. The report indicates that the labor market is only gradually moderating, with initial claims increasing slightly to 232,000 in the week ended August 17. This data will play a crucial role in shaping Federal Reserve Chair Jerome Powell’s assessment of the labor market ahead of his speech at the Jackson Hole symposium.
Market participants are closely watching for any signals that could indicate the Fed’s stance on interest rates, especially after inflation has come down from its pandemic peak. The Fed Bank of Kansas City President Jeffrey Schmid has expressed a desire to see more economic data before supporting any decision to begin reducing interest rates, suggesting a cautious approach to monetary policy adjustments.
In the equity market, the S&P 500 is approaching its all-time high, buoyed by early gains in New York trading. Corporate highlights such as Peloton Interactive Inc.’s profit beat and Snowflake Inc.’s sales outlook are influencing market sentiment. Meanwhile, Treasury yields are advancing, with the 10-year yield rising to 3.84%. The upcoming events, including Jerome Powell’s speech and key economic data releases like Japan CPI and US new home sales, are expected to be pivotal for the USD’s trajectory this week.
What to Watch Today…
- Jackson Hole Symposium Friday
- Monex USA Online is always open.
MXN ⇓
The Mexican Peso continues to be down and continues to flow around its weakest point since the end of 2022 after having reached it a few days ago. MXN has become a challenging currency for traders as it continues to weaken, with a significant slide deepening this week. Local politics, the unwinding of carry trades, and concerns about the US economic and political outlook are contributing to the bearish sentiment. The Peso has declined more than 3.0% against the dollar this week and almost 14.0% in the past three months, marking it as the worst performer among its peers. Its six-month implied volatility has surged to near the highest in three years. The new congress in Mexico and the inauguration of President-elect Claudia Sheinbaum next month add to the uncertainty. The upcoming US presidential elections and the potential impact on nearshoring trends if Donald Trump wins are also factors to watch for Q4.
EUR ⇑
The Euro has been up and flowing around its strongest level over the Buck since mid-July of 2023. The Federal Reserve is moving closer to easing, which is only aiding the shared currency’s performance. Markets seem convinced that Labor and other items have softened enough, thus drawing attention to Fed Chair Jerome Powell’s upcoming speech at the Jackson Hole symposium. Additionally, the Eurozone’s economy received a positive boost from the Paris Olympics, with the composite PMI reading surpassing optimistic forecasts. Other than Manufacturing staying below an expansionary reading, Services and the Composite are making up for that lag. Euro will be at the mercy of headlines going into the last week of August with no significant data pieces out until Friday when we get the Consumer Price Index.
