The U.S. dollar has experienced notable movements in the foreign exchange market today.
Overview
U.S. equity futures posted modest gains as traders prepared for a week packed with data that will shed light on the health of the world’s largest economy and the outlook for Federal Reserve interest rates. The S&P 500 and Nasdaq 100 contracts were about 0.3% higher, while Europe’s Stoxx 600 index pared a 0.5% advance. There was some relief for investors from the recent volatility, fueled by concerns that the Fed is waiting too long to cut rates. The S&P 500 last week posted both its biggest one-day slump and best rebound since 2022.
In the currency market, the yen dropped the most against the dollar among major peers, giving back some of last week’s surge when traders slashed bearish bets in the wake of the Bank of Japan’s July 31 rate hike. The BOJ’s move prompted investors to dump carry trades, unleashing turmoil that ricocheted across global markets. The Cboe Volatility Index, Wall Street’s fear gauge, has retreated from its highest levels since the early days of the Covid-19 pandemic. However, there’s no certainty the relative calm will continue, with Wednesday’s U.S. inflation data being the key volatility event for the week.
What to Watch Today…
- U.S. CPI, Friday
- Euro-Zone GDP Wednesday
- U.K. GDP Thursday
- U.S. Retail Sales, Industrial Production Thursday
- Monex USA Online is always open.
JPY ⇓
The Japanese Yen is the biggest loser thus far today, with a 1.0% loss of value. The yen dropped the most against the dollar among major peers, giving back some of last week’s surge when traders slashed bearish bets in the wake of the Bank of Japan’s July 31 rate hike. The BOJ’s move prompted investors to dump carry trades, unleashing turmoil that ricocheted across global markets. The Cboe Volatility Index, Wall Street’s fear gauge, has retreated from its highest levels since the early days of the Covid-19 pandemic. However, there’s no certainty the relative calm will continue, with Wednesday’s U.S. inflation data being the key volatility event for the week.
According to Citigroup Inc., traders are positioning for the S&P 500 to move 1.2% in either direction when the consumer price index report is released. Meanwhile, as bond markets have moved to account for a Fed that is “behind the curve,” the risk isn’t “priced into current equity multiples,” according to Morgan Stanley strategists. The team led by Michael Wilson said economic growth is the primary concern for investors, rather than inflation and rates.
EUR ⇑
The Euro is trying to get back to gains after experiencing its best level over the buck since March last week. U.S. equity futures posted modest gains as traders prepared for a week packed with data that will shed light on the health of the world’s largest economy and the outlook for Federal Reserve interest rates. The S&P 500 and Nasdaq 100 contracts were about 0.3% higher, while Europe’s Stoxx 600 index pared a 0.5% advance. There was some relief for investors from the recent volatility, fueled by concerns that the Fed is waiting too long to cut rates. The S&P 500 last week posted both its biggest one-day slump and best rebound since 2022.
Barclays recommends buying the pound against the euro and sees the UK currency climbing to a two-year high as a solid economy and a closer relationship with the EU continue to support the currency. The UK bank expects a raft of domestic data this week to indicate an improving economy, which should boost the pound following its steep selloff so far this month.
