– Oil prices fall as Iran stands down
– Sand Francisco Fed President sees “gradual” rate reductions.
– US dollar sinks on improved risk sentiment.
USDCAD: open 1.3681, overnight range 1.3662-1.3685, close 1.3679, WTI $74.84, Gold, $2499.95
The Canadian dollar rallied on Friday, buoyed by rising U.S. consumer confidence, which in turn fueled another increase in equity prices. The S&P 500 closed with a 0.20% gain for the day, extending its seven-day rally to a 6.8% increase.
This week promises to be very busy, with top-tier economic data vying for attention alongside speeches and comments from the world’s leading central bankers at the Jackson Hole Symposium in Wyoming, and developments from the Democratic National Convention in Chicago.
Canadian inflation data for July will be released tomorrow, with analysts suggesting it could solidify expectations for a Bank of Canada rate cut in September. Most Canadian bank economists predict inflation will have fallen to between 2.4% and 2.7% in July. However, these results might be overshadowed by Eurozone inflation data, which could have a more significant impact on broader U.S. dollar movements. Despite this, inflation is increasingly seen as yesterday’s news, with the focus shifting to central banks’ efforts to prevent an economic downturn.
The annual Kansas City Fed’s Jackson Hole Symposium kicks off on Thursday, with all eyes and ears on Fed Chair Jerome Powell’s keynote address. This event has been the setting for several major Fed policy announcements in the past, which is why it garners so much attention.
Attention may also be drawn to the Democratic National Convention in Chicago, where Kamala Harris is set to be officially named the Democratic presidential candidate on Thursday.
EURUSD fluctuated within a range of 1.1023-1.1050, closing at the same level as Friday. Market sentiment improved due to dovish statements from Fed officials and Iran’s decision not to act on threats against Israel. However, any further upside for EURUSD may be capped if upcoming Eurozone data stokes inflation concerns.
GBPUSD advanced from 1.2938 to 1.29765 before settling at 1.2961 in New York. The pound is supported by overall U.S. dollar weakness and an increase in the Rightmove House Price Index, which rose to 0.8% y/y in August, up from 0.4% in July.
USDJPY saw significant volatility, with prices spiking to 148.05 during the Asian session before plunging to 145.19 just before the European session began. The pair later recovered to 146.41 in New York. The combination of expectations for higher Japanese rates and lower U.S. rates, along with intervention fears and unwinding of carry trades, is causing market instability.
AUDUSD climbed from 0.6660 to 0.6694, buoyed by improved risk sentiment. The pair remains supported by last week’s remarks from RBA Governor Michelle Bullock, who cautioned that upside risks to inflation could necessitate higher interest rates.
