Central banks and macroeconomic data have taken an unusual backseat to currency markets as US politics, turmoil in equity markets and some sizeable positioning adjustments have driven volatility in some currency pairs inconsistently with macroeconomic developments, notes Francesco Pesole, FX strategist at ING.
A move below 104.0 for the DXY is imminent
“In the US, the two main events of the week are the FOMC rate announcement on Wednesday and the July jobs report on Friday. The June dot-plot projections look unreasonably hawkish given recent data flow and market valuation, and we expect the Fed to pivot to a more dovish stance in line with recent comments and in anticipation of a possible cut in September.”
“Markets are already pricing in fairly aggressive easing in the US. A September cut is fully priced in and a total of 68 basis points is expected by year-end. We will likely see markets adding easing bets across the curve following a dovish stance, but we concede there is a chance Fed Chair Jerome Powell errs on the side of caution and delivers a less dovish (and USD-positive) communication package this week.”
“Anyway, adding in the downside risks from Friday’s jobs figures and a possible surprise hike from the BoJ, we have a bearish bias on the DXY this week, and would not be surprised to see a move below 104.0.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
