FX Daily: Porridge cools for goldilocks
USD: Softer run of data continues Friday’s release of a softer set of US retail sales data for July has added to the case against the Federal Reserve hiking rates in September. Just 7bp of hikes are now priced at that meeting, and expectations for a 50bp tightening cycle into next year have been scaled ...
The US retail sales figures for July, released on Friday, have contributed to the argument against the Federal Reserve raising interest rates in September. Currently, only seven basis points of hikes are priced for that meeting, and expectations for a 50 basis point tightening cycle into next year have been reduced to 35 basis points.
Global risk markets are benefiting from the possibility that the Fed could keep rates unchanged for a longer period, and investors are content to continue targeting long carry trades and long commodity stories, at the expense of low-yielding currencies like the Japanese yen and Swiss franc.
During the week, the US data calendar does not offer much room for change. A potential highlight may be the release of the minutes from the 29th July FOMC meeting on Wednesday evening. This meeting saw a 9-3 vote in favor of maintaining unchanged rates, and a confusing press conference followed. Since the meeting, longer-dated Treasuries have sold off, and with slightly cooler activity data, it will be difficult for the market to revert to a fully hawkish stance if the minutes indicate a closer call on the unchanged rates decision than many anticipate.
The US Dollar Index (DXY) is testing the lower end of a 99.40-100.00 trading range and may continue to trade on the softer side throughout the week as investors focus on higher-yielding and procyclical currencies.
Written by urgent.news from Hellenic Shipping News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
