USD trading defensively as markets digest Fed’s Cook – Scotiabank

The US Dollar (USD) is soft but overall movement remains limited as G10 currencies respond to news of President Trump’s moves to fire Fed Gov, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

USD trading defensively as markets digest risks for policy and independence

"Cook and consider the implications of renewed political turmoil in France. Cook is said to be disputing the firing, and has no intention of resigning. Late Monday, Dallas Fed President Logan delivered a speech in which she highlighted the risk of temporary pressures in money markets around quarter-end next month, given the Fed’s ongoing balance sheet reduction. The topic warrants close attention given recent periods of money market turmoil, most notably in 2019 when turbulence forced 75bpts of easing in the meetings that followed."

"Most G10 currencies are showing modest gains vs. the USD as we head into Tuesday’s NA session, lead by EUR, GBP, and JPY. MXN, CAD, and AUD are up marginally, while NZD, CHF, and SEK are flat. The NOK is a notable underperformer, down 0.3%. The broader market’s tone appears somewhat mixed as equity futures trade somewhat defensively while Treasurys reflect shifting Fed risks—with lower yields at the front end while the back end sells off, delivering a steeper curve overall. In commodities, oil prices are soft and fading their recent recovery on the back of renewed concerns of oversupply as the IEA warned of a possible record surplus next year."

"Copper is soft, in the middle of its recent range, and gold prices are consolidating at the midpoint of their range since mid April. The focus for Tuesday’s NA session will center on a heavy US data release schedule that includes the Philly, Richmond, and Dallas Fed activity indices, as well as durable goods order and the US Conference Board’s consumer confidence figures. There are no scheduled Fed speakers."