US Dollar: Fed repricing risk weighs on usd – BBH

FXStreet Insights Team FXStreet

Brown Brothers Harriman’s (BBH Elias Haddad notes the US Dollar (USD) is consolidating gains, with the US Dollar Index (DXY) testing its 200‑day moving average resistance and United States (US) data showing Personal Consumption Expenditures (PCE) Price Index inflation stuck above the Fed’s 2% target while real spending stalls. Fed funds futures still price limited tightening, but Haddad argues this gives the Fed room to hold and leaves the Dollar vulnerable to a dovish repricing.

Fed stance leaves Dollar exposed

"USD is consolidating yesterday’s gains with the DXY index testing resistance at its 200-day moving average (99.17). Brent crude oil prices are in a holding pattern under $90 a barrel. Nvidia Corp beat Wall Street revenue and sales expectations reinforcing the strength of the AI capex boom."

"Headline PCE rose 0.2% m/m (consensus: 0.1%) vs. -0.1% in June, to be 3.7% y/y (consensus: 3.6%) for a second straight month. Core PCE matched expectations at 0.2% m/m vs. 0.1% in June and held at 3.3% y/y for a second straight month. The less noisy Dallas Fed trimmed mean PCE and the Cleveland Fed median were unchanged at 2.3% y/y and 2.7% y/y, respectively."

"Yesterday, the US July PCE print showed inflation stuck above the Fed’s 2% target but not accelerating, while real personal spending stalled. That gives the Fed room to hold and leaves USD vulnerable to a dovish repricing. Fed funds futures price in 36% odds of a 25bps hike to 3.75-4.00% at the next September 16 meeting and a total of 40bps of tightening over the next twelve months."

"The Jackson Hole Economic Symposium starts today, with Fed Chair Kevin Warsh speaking tomorrow. Clear policy signal will likely be scarce given Warsh’s reluctance to provide forward guidance and the absence of a Q&A session. Instead, Warsh may preview the Fed five task forces’ early findings on communications, the balance sheet, economic data, productivity and jobs, and the inflation frameworks."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD bulls regain control above 0.6950 amid USD retreat

AUD/USD regains traction and extends the previous day's bounce from the weekly low, aiming for 0.7000 in Asia on Friday. The overnight pullback in US bond yields keeps the US Dollar below an 18-month high, which in turn offers some support to the pair. Meanwhile, hawkish RBA expectations also keep the major underpinned.

USD/JPY holds gains near 158.00 after Japan's weak Household Spending data

USD/JPY clings to gains around 158.00 after data showed on Friday that Japan's Household Spending fell for the ninth straight month, undermining the Japanese Yen. Meanwhile, the US Dollar remains depressed as the overnight fall in US bond yields counters a hawkish Fed and geopolitical uncertainties, could cap any downside in the pair.

Gold remains range-bound below $4,200

Gold has given up some ground after an initial bullish attempt to reach weekly highs, returning to below the $4,200 mark per troy ounce on Friday. The US Dollar’s strong upside momentum, combined with rising US Treasury yields across the curve, seems to keep further gains in the yellow metal under scrutiny.

Week ahead: US CPI, France’s budget crisis and Q3 earnings to set the market tone

The US dollar held relatively strong this week, despite the disappointing US jobs report on October 2, which further decreased the probability of a back-to-back rate hike by the Fed at the upcoming gathering on October 28.

CFTC Report: Euro and Aussie shorts expand amid diverging signals

The week in one sentence: Euro and Australian Dollar shorts deepened in the week to October 6, while Yen longs rebuilt. In addition, Coffee buying continued, and Gold exposure remained elevated despite another price decline. Speculators turned more negative on the Euro, increasing the net exposure to around 99.3K contracts.

Has Bitcoin really escaped the macro forces it was built to fight?

Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?