After a low-volume and low-volatility Monday, the United States Dollar is trading fairly steadily this morning with a few exceptions.
Overview
Durable goods orders, geopolitical anxieties, and further Fedspeak all combined to pull USD in different directions in yesterday’s session, and those themes continue to drive price action today ahead of key corporate earnings figures and US data later this week. The Dow Jones Industrial Average closed at a record high yesterday after San Francisco Fed President Mary Daly echoed Jerome Powell’s sentiment from last week that ‘the time has come’ to begin cutting interest rates and winding back the tightening cycle of the last two years.
Whether the price action we’ve seen from USD over the past few sessions marks the entrance into a new, weaker set of ranges for the world’s most-used currency does remain to be seen, but the Federal Reserve’s importance in determining global exchange rates – even for non-Dollar crosses – cannot be overstated. Even after the Fed’s peers began easing earlier this summer, markets saw little in the way of material change in exchange rates until the last couple of weeks as traders began to (allegedly, correctly) anticipate a pivot from the Fed coming in September. Powell’s words at the Jackson Hole Symposium last week all but solidified this stance and the Dollar has been on the losing end of this repricing since mid-month. On the flip side, however, geopolitical dynamics are keeping Dollar losses somewhat stemmed as tensions in the Middle East continue to ramp up and the risk of a wider war involving multiple nations and proxies in the region grows.
Though price action so far this week has been relatively quiet after Friday’s big repricing move, the data calendar picks up steam in the back end with key corporate earnings releases, notably from Nvidia, coming tomorrow. US stocks have been ebullient on the potential for easing from the Fed, but Nvidia’s release could be a bellwether for AI trading in general. Not to be outdone, Thursday also sees the second reading of Q2 GDP, and Friday morning, the Fed’s preferred inflation gauge of PCE, along with personal incoming and spending for July, will be released.
What to Watch Today…
- U.S. GDP Thursday
- U.S. Personal Income, spending, PCE price on Friday
- Monex USA Online is always open.
GBP ⇑
Pound Sterling is outperforming other G10 currencies this morning, at one point gaining as much as a third of a percentage point against USD to trade at a 13-month high. Technical analysis does show some risk that Sterling is overbought at the moment and long positions at this price may not be a smart play, but options pricing does show traders believe in further upside risk as a possibility given upcoming Fed and BoE meetings. Incoming Prime Minister Keir Starmer spoke this morning and laid the foundation for his government’s October budget to be “painful,” targeting “short-term pain for long-term gain” as the UK attempts to dig its way out of what Starmer terms a “22 billion pound black hole” in the nation’s finances.
JPY ⇓
Japanese Yen has slipped this morning off of yesterday’s highs, falling roughly a quarter of a percent against USD overnight. The USDJPY pair is particularly sensitive to Federal Reserve chatter as the gap between the two nations’ interest rates remains quite daunting even after the Bank of Japan hiked interest rates last month. Finance Minister Shunichi Suzuki said overnight that the Japanese government would continue to monitor the impact of US monetary policy on the larger Japanese economy and highlighted that Powell’s statements at Jackson Hole last week were ‘in line with’ their government’s assessment of the larger economic state of the US.
