Idea of the Day
The moves we’ve seen on sterling yesterday (firmer thanks to Carney) together with the yen and the Aussie overnight (both firmer) have put further pressure on the US dollar. At the beginning of July, it seemed that dollar bulls were everywhere. The Fed was seen tapering, European central banks were still at risk of undertaking further stimulus, so the FX implications seemed pretty clear.
As it is, the dollar is nearly 2.5% lower on the dollar index since the start of July and is at a 7 week low on this measure. Things are never quite as clear cut as that, especially in FX markets, with many other currencies (the yen, Aussie, less so sterling) already having depreciated substantially in the first half of the year. The stronger dollar will come, it may just take longer than many expected.
Data/Event Risks
EUR:Â The ECB monthly report is usually a low risk event for markets, but just worth keeping a beady eye on during these liquidity constrained times.
USD:Â As always, weekly claims data in focus as the evolution of jobs data remains key in deciding whether the Fed embarks on tapering next month. The trend has been improving of late, so lower than expected numbers (335k gain) could give the dollar a small lift.
Latest FX News
JPY:Â The yen firmer once again in Asia, with USDJPY having fallen for the past five consecutive sessions. The Nikkei was once again on the defensive, helping the firmer tone to the yen, USDJPY down to levels last seen mid-June just above 96.00.
AUD:Â The latest Aussie fight-back continues, largely on the back of the latest trade data from China, which recorded a strong rise in imports, so offering some hope that Aussie exports to China will continue to hold up. The Aussie close to the 0.91 level as a result. The jobs data fell to the disappointing side, showing a decline in overall employment of 10.2k, although the rate held steady at 5.7%.
GBP: The inflation report threw another spanner into the works for sterling bears, with cable trading a near 3 big figure range on the back yesterday’s regime changes.
EUR: There is a real reluctance on the part of the single currency to break higher on EURUSD, but it’s been dragged higher by developments elsewhere, with the surge in sterling helping to push the dollar lower yesterday and drag EURUSD above the 1.33 level.
Further reading:Â
EUR/USD Aug. 8 – at two month highs on dollar weakness, strong German data
US dollar
