– Speeches from Jackson Hole Symposium are the key focus.
– EURUSD suffers from disappointing German data.
– USD dollar opens firm ahead of Powell speech.
USDCAD: open: 1.3586-90, overnight range: 1.3570-1.3602, close 1.3583, WTI $80.11, Gold $1916.07
The Canadian dollar is on the defensive once again. Yesterday’s attempt at rallying was thwarted early when US weekly jobless claims data were 10,000 less than forecasted. The result gives the Fed more room to maintain its tightening posture and keep US rates elevated.
The US dollar rallied, Wall Street plunged, while US Treasury yields remained steady.
There is a lot of anticipation around Fed Chair Jerome Powell’s speech from Jackson Hole, Wyoming, due at 10:00 am today. Traders expect a hawkish outcome and have priced markets accordingly, suggesting Mr. Powell needs to be extremely hawkish if prices are to rise any further.
The FOMC hiked rates by 25 bps on July 26 and stated that further rate increases would be data-dependent. “The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and expectations, and financial and international developments.”
The top-tier economic reports since that meeting have been inconclusive, which is why more than a few policymakers believe pausing further rate increases is the right strategy. Philadelphia Fed President (and voting member of the FOMC) Patrick Harker said, “Right now, we’ve probably done enough.”
The Canadian dollar is not deriving much benefit from oil prices. West Texas Intermediate (WTI) continues to hover around the $80.00/barrel range due to contrasting influences. WTI is supported by speculation that Saudi Arabia is considering another production cut, while the risk of lower demand from China and the US easing restrictions on Venezuelan oil limits gains.
EURUSD traded in a 1.0767-1.0816 range and is near the top of that band in NY trading. Weaker than expected German Ifo data and news that German GDP was flat in Q2 did not have a lasting impact on prices.
GBPUSD recovered from early losses and then rallied from the 1.2561 to 1.2622 range, with price action tracking broad US dollar sentiment.
USDJPY traded in a 145.25-146.25 range. Lower than expected Tokyo inflation data (actual 2.8% vs July 3.2% y/y) underpinned prices, as did the US 10-year Treasury yield, which is at 4.23% in NY today.
AUDUSD traded in a 0.6403-0.6431 band and is attempting to hang on to its 0.4% gain this week. AUDUSD remains pressured because of the dovish outlook for the RBA.
Today’s US data includes the US Michigan Consumer Confidence Survey