As Powell's Guidance Continues, the Dollar Stabilizes

EnclaveFX Ltd
Jun 26, 2023

US Dollar (USD) performance against most major currencies is very mixed at the start of this week. There's a lot of correlation between the US Dollar and the Australian Dollar and the Chinese Yuan because Australia is the biggest commodity supplier to China. Mostly, the US Dollar is retracing a bit from its peak performance last week, which makes US Dollar Index (DXY) very mixed and trading sideways right now.

Traders can't start planning their summer vacations yet since a lot of big events are happening this week. It's the European version of the Fed's Jackson Hole Symposium, organized by the European Central Bank (ECB). On Wednesday and Thursday, Fed Chairman Jerome Powell will talk about that event. Markets will have a lot of data points to eat up on Tuesday at 12:30 GMT, Thursday at 12:30 GMT, and Friday at 12:30 GMT for the final US Gross Domestic Product (GDP) estimate and Personal Consumption Expenditure (PCE) Price Index.

As we head into a week that will be filled with events, the US Dollar faces a relatively uneventful Monday

  • Japanese vice finance minister Masato Kanda said the recent FX moves have been too rapid and excessive, so he's not ruling out intervening. The Japanese Finance Ministry could intervene in foreign exchange to appreciate the Yen.
  • Joe Biden will give a speech on Wednesday about his economic plan.
  • The US has a very light data calendar on Monday, with only the Dallas Fed Manufacturing Activity Index due at 14:30 GMT. It was -29.1 before and expected to be -26.5.
  • US Treasury is auctioning 3-month, 6-month, and 2-year bonds in the short term.
  • There won't be a Fed speaker.
  • Over the weekend, WTI Crude Oil rose on geopolitical news where the Wagner Group was on its way to Moscow. There's a chance, or at least the idea, that this chokehold war could end, helping the global economy, and bringing in more demand. At the start of the session, crude oil spiked to $70.11, but now it's back at $69.20.
  • In spite of the sell-off, all major indices are still in the red today, with Japan's Topix finishing -0.20% lower. As for US equity futures, they say it's going to open red.
  • Markets are pricing in a 71.9% chance of 25 basis points (bps) interest-rate hike on July 26th, according to the CME Group FedWatch Tool. As US Fed Chairman Powell remained hawkish in his two recent hearings, the probability of another hike has increased.
  • On Monday, bonds are bid as the 10-year Treasury yield drops to 3.68%. Other regions are seeing the same thing as well, like German bonds.


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