XE Market Analysis: The US Dollar Steadies Ahead of Jackson Hole Party

. 3 min read

OVERVIEW

  • The Dollar Index is flat near a 2019 high, waiting for the big Central Bankers' meeting we've been mentioning over the past few days.
  • Soft PMI readings send the Euro below the 1.11 handle.
  • WTI Crude oil gained another 1.20% but commodity-currencies remain on the defensive.

US DOLLAR

The US Dollar Index is mixed this morning amidst escalating trade tensions, brewing political uncertainties in Italy and a Brexit poised for final-days drama. The antipodean currencies are trading lower vis a vis the greenback, whilst the Japanese yen is oscillating within recent ranges, supported by safe-haven flows.

We expect risk-off sentiment to likely to persist over the coming days/sessions. The market will gradually shift its attention to Jackson Hole, Wyoming, where central bankers will gather for their annual conference. Besides a cuppa iced-cider and roasted sweet corn, the hot topics are likely to range from international trade, low growth, anaemic inflation and to the need to be creative with limited monetary tools.

BRITISH POUND

The Sterling is enjoying rare gains with the market hoping PM Johnson’s trip will result in an outcome other than no-deal Brexit. The officials have a 30-day window to concoct an alternative to avoid an Irish backstop. With no local data for release today, we expect the GBP to trade with measured optimism.

EURO

The move from the 1.12 levels to the lows of 1.11 was rather swift for the EUR/USD. The pair is now trading just under the 1.11 handle following the release of subdued PMI readings. The manufacturing sector continues to suffer and confidence among firms are low resulting in lower job creation. German economy also sent out signals of distress with the growth of service sector dented by falls in goods productions.

CANADIAN DOLLAR

USD/CAD continues to trade flat, within touching distance of 1.33 handle. Canadian inflation rose above market estimates and may keep the BoC from buying an insurance rate cut at its next meeting. However, growing household debt and ongoing global trade tensions are expected to keep the CAD on the defensive.

AUSTRALIAN DOLLAR

The Aussie dollar is not having its best day today following a speech from the RBA which left the door open for further interest cuts. AUD USD is now at 0.67929 after hitting a high of 0.67958.

The Japanese economy is not immune to ongoing trade tiff between the two largest trading partners. Its all-industries activity index missed estimations, falling 0.8% in June. Whilst the FOMC meeting minutes provided no new clues, the policymakers do not see their last decision as a pre-set course of action.  The risk-off sentiment is expected to support traditional safe-haven currencies.