US Dollar: Looking for a shift in Fedspeak – ING

FXStreet Insights Team FXStreet

ING strategists Francesco Pesole, Frantisek Taborsky and Chris Turner note that post-CPI summer conditions are suppressing FX volatility and keeping the Dollar broadly stable. They still see scope for a weaker Dollar as market expectations for further Federal Reserve tightening look overstated. Upcoming Fedspeak, Jackson Hole and second-tier US data are seen as potential catalysts, while Gulf developments mainly affect relative-value trades.

Fed expectations and muted volatility

"The post-CPI midsummer environment is understandably weighing on FX vols. We argued yesterday, that this could remain the norm for at least the next couple of weeks. At the same time, we retain a preference for dollar downside, as we still believe market conviction around further tightening by the Federal Reserve is too strong."

"For now, Fedspeak offers the clearest potential catalyst for market moves. There is still considerable uncertainty over the message that could emerge from the late-August Jackson Hole Symposium, particularly after a CPI report that leaned dovish without delivering a definitive signal."

"Today’s US calendar includes July retail sales, expected at a modest 0.1% month-on-month, and the University of Michigan surveys, which are expected to show little change from July. These second-tier releases would likely need to deliver significant surprises to trigger a meaningful dollar reaction."

"Meanwhile, headline fatigue surrounding the Middle East remains elevated. US-Iran negotiations appear to be at a stalemate, but Brent declined yesterday, providing some support for global bonds. The bar for the dollar to rebuild a strong direct relationship with oil prices remains quite high, and the impact of developments in the Gulf may remain more visible in G10 relative-value trades, where pairs such as NOK/SEK and AUD/NZD continue to track the energy story quite closely."

"Post-CPI summer trading conditions continue to keep FX volatility subdued, leaving EUR/USD largely anchored. Still, our models are pointing to some short-term undervaluation in the pair, supporting our moderately bullish bias for coming weeks. Gulf headlines remain a marginal factor for FX, more visible in some relative value trades than USD crosses "

(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.

GBP/USD advances above 1.3500 as easing Fed hike bets down USD

GBP/USD extends the advance above 1.3500 in the European trading hours on Friday. The US Dollar drops against the British Pound as cooler-than-expected US consumer and producer inflation data have limited the Fed's room for further interest rate hikes. Traders will keep an eye on the US July Retail Sales report and the Consumer Sentiment data later this Friday.

EUR/USD climbs above 1.1550 as US Dollar slips ahead of data

EUR/USD gains traction in the European session on Friday and trades in positive territory above 1.1550. The pair capitalizes on renewed US Dollar weakness, as doubts over a September Fed rate hike offset lingering Middle East concerns. The US Retail Sales and UoM Consumer Sentiment data are in focus later in the day. Meanwhile, the data from the Eurozone showed that the Gross Domestic Product (GDP) expanded at an annual rate of 1% in the second quarter, as expected.

Gold sticks to losses but holds above $4,300 as reduced Fed hike bets weigh on USD

Gold recovers slightly from the $4,300 neighborhood heading into the European session, though it remains in negative territory for the second straight day. Moreover, a mixed fundamental backdrop warrants some caution before positioning for an extension of the retracement slide from $4,450, or the highest since June 5, set the previous day.

Bitcoin SV hits three-month high, eyeing 200-day EMA breakout

Bitcoin SV is up nearly 2% extending a steady upward trend over the last two weeks. Retail strength builds in BSV amid multiple vulnerabilities found in the Bitcoin ecosystem. Bitcoin SV’s technical outlook is bullish as the price tests an upside breakout above the 200-day Exponential Moving Average at $15.39.

UoM Consumer Sentiment Index set to ease as inflation, labour market worries loom

The University of Michigan will release the preliminary estimate of August’s Consumer Sentiment Index on Friday. US consumers’ confidence is expected to have ticked down to 54.5 in August from 55.2 in July, as measured by the UoM Consumer Sentiment Index.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.