Forex Today: Dollar surges on tightening hopes
|What you need to know on Thursday, August 5:
The dollar is up after US Federal Reserve Vice-Chair Clarida said that if core inflation hits 3% this year, he would consider it “much more” than a moderate overshoot. He added that he expects conditions for raising interest rates to be met by the end of 2022 if inflation and employment outcomes meet his forecasts. Additionally, the ISM Services PMI jumped to 64.1 in July, beating expectations. The ADP survey, however, showed that the private sector added just 330K in July.
On Thursday, the focus will be on the Bank of England. The central bank is having a Super Thursday and is set to leave its monetary policy unchanged and release new forecasts in its Monetary Policy Report. Governor Andrew Bailey is scheduled to offer a speech afterwards. Market participants will be looking for hints of tightening.
EUR/USD trades at weekly lows around 1.1840. The GBP/USD pair hovers around 1.3900, unchanged as the BOE looms. Commodity-linked currencies edged lower, with the AUD/USD pair back below 0.7400 and USD/CAD trading around 1.2550.
The USD/JPY pair recovered from a daily low of 108.71, a level that was last since in May, to the current 109.40 price zone, amid a U-turn in the dollar’s demand. Japan is struggling with an upsurge in coronavirus cases and the head of the local Medical Association called for a nationwide state of emergency.
Gold jumped to $ 1.831.71 a troy ounce but trimmed gains and finished the day at around 1,812. Crude oil prices were sharply down, with WTI settling at $ 68.00 a barrel. The U.S. Energy Information Administration said crude stockpiles rose by an unexpected 3.6 million barrels last week, putting pressure on the black gold.
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