Recovering from small losses during the Asian trading session overnight, the United States Dollar begins this week largely flat against major currencies from Friday’s close.
Overview
Speeches from both the Federal Reserve’s Jerome Powell and the European Central Bank’s Christine Lagarde Friday at Jackson Hole failed to move the needle in the G10 much at all; both central bank heads gave markets very little in the way of new information. Powell proved to have slightly more sway on markets than his European counterpart, swinging USD marginally stronger as he reinforced the “higher-for-longer” refrain that has become the Fed’s preferred narrative.
Lagarde’s speech, though leaning toward the hawkish side of the spectrum, failed to impress traders as the Eurozone’s macroeconomic situation grows more dire. While inflation through the Eurozone remains higher than that of the US, further signs of economic contraction in the region continue to raise questions about many European nations’ ability to tolerate a sustained period of high interest rates. Lagarde demurely avoided a clear answer about any further hikes from the ECB, similarly to Powell, but the policymakers of the ECB do not seem as unified in their decision-making as their American counterparts.
Data releases really ramp up later this week as summer “vacation” ends across the world. The US sees GDP for Q2 Wednesday, inflation readings Thursday, and jobs data for August Friday morning, likely to provide USD with more direction in the second half of the week.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
AUD ⇑
Australian Dollar starts this week the only real mover inside the G10, posting a gain of a quarter percent against USD. Retail sales beat expectations for the month of July, likely driven by tourism from the women’s World Cup tournament. Asian equities also jumped up overnight, providing the Antipodean currency with additional strength. Downside risks remain high, however, as continued questions swirl around China’s economic recovery and potential stimulus measures.
JPY ⇓
Japanese Yen remains on intervention watch to start this week as JPY failed to hold onto last week’s advances, sliding once again past the level that prompted government intervention last year. Markets may have expected some stronger statement from Bank of Japan Governor Kazuo Ueda after his European and American counterparts spoke at Jackson Hole Friday, but his commentary focused on the lower underlying inflation in Japan and left the Yen adrift. It seems increasingly unlikely that the BoJ will enact any meaningful policy tightening, keeping JPY depressed.
