Hormuz reopening a 'bearish development' for Dollar
Falling oil prices, together with the prospect of an imminent reopening of the Strait of Hormuz, represent a bearish development for the dollar.
Yet although the greenback has edged lower against its peers this week, it isn't showing the kind of fragility that would signal a material unwinding of safe haven flows.
This is partly because market positioning already reflected a fairly high degree of optimism around an Iran war de-escalation, while the other key sticking point in negotiations - the future of Iran's nuclear ambitions - remains far from resolved.
Friday’s nonfarm payrolls report will be the main macroeconomic risk event for markets this week.
Recent communications from FOMC chair Warsh have suggested that the Fed feels under no real pressure to raise rates this year, though a hot labour market report could change things somewhat. Economists are pencilling in a job creation number around the 80k mark, which would mark a slight acceleration relative to June and above the current estimated breakeven rate of employment growth.
Author
Matthew Ryan, CFA
Ebury
Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.
