After five straight winning sessions, the United States Dollar finally finds itself retreating against the G10 this morning.
Overview
The Dollar Spot Index fell 0.2% off the 10-week high it hit yesterday, and USD starts the morning down an average of 0.3% against most majors. July’s meeting minutes from the FOMC showed that there is some resistance to any further rate hikes this year.
While the vote to hike rates by 25 basis points last month was unanimous, the minutes showed that two of the ‘yes’ votes were quite begrudging, and it’s increasingly likely that the Fed may choose to hold interest rates as is for a longer period of time rather than tightening further. This does not exactly mark a rhetorical shift from the Fed, as it was clear that further tightening was not a done deal before the release of these minutes, but markets are taking this as a more concrete signal that a further hike should not be priced in.
Across the world, Chinese economic woes continue to compound, and traders are holding their collective breath for intervention from Politburo as the likelihood of stimulus has increased dramatically. Twin specters of a deepening housing sector crisis and a weakening Yuan are proving to be quite the thorn in the side of the Politburo, but the expectation of government intervention on both fronts continues to rise. It’s quite unlikely the Chinese government will simply let this play out naturally, running the risk of being “run over” by the US economy, and currency markets are responding to this expectation in kind by adopting a more risk-forward attitude today.
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What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
AUD ⇑
Australian and New Zealand Dollars are recovering some of the month’s heavy losses this morning against the Buck after expectations of Chinese stimulus increased dramatically overnight. The Antipodean nations remain strong trading partners of China, so any perceived change in the nation’s economic outlook drives strength for the two currencies. Commodity prices also rose this morning as risk-on attitudes finally prevailed in overnight trading.
JPY ⇑
Japanese Yen has finally snapped its losing streak against USD this morning after sliding past the level that prompted government intervention yesterday, clawing back 0.5% overnight. After verbal cues from Japan’s finance minister that the BoJ will intervene if necessary, it remains to be seen whether markets believe him or call his bluff. The term du jour describing the BoJ’s rhetoric is “jawboning,” all talk and no action, but if the Yen cannot hold onto today’s good fortune it’s likely the central bank’s hand will be forced into intervention.
