US Dollar: Warsh speech keeps ranges contained – ING

FXStreet Insights Team FXStreet

ING’s Chris Turner notes a quiet, risk-positive week for global markets, with low volatility and mixed G10 FX, as the Dollar debasement theme fails to extend. Markets expect little on monetary policy from Fed Chair Kevin Warsh at Jackson Hole, and ING anticipates FX will track long-dated Treasuries, with DXY likely holding a 99.00-99.30 range.

Fed speech, yields and DXY range

"It has been a quiet, risk-positive week for global asset markets. Volatility remains low and the picture in G10 FX has been mixed, with certainly no follow-through on the dollar debasement theme which returned last week. The FX market expects little from Kevin Warsh today, with a one-day USD/JPY straddle pricing around a 35 USD pip range today."

"It may well be that he avoids any discussion of monetary policy whatsoever and is quietly contented with market pricing of a Fed September hike having slipped back to 8/9bp. If he does go near monetary policy, expect a reiteration of a Fed commitment to monetary policy – especially after his performance at the July FOMC unnerved the long-end of the Treasury market."

"We suspect FX markets will take their cue from long-dated US Treasuries today. If somehow a hawkish read emerges, then the dollar can advance against the low-yielders of CHF and JPY. If Warsh underestimates the mood at the long-end of the market and 30-year Treasury yields spike back towards 5.30%, higher volatility will see higher-yielding carry currencies underperform and probably CHF start to outperform again as it did briefly last week."

"Coincidentally, at the time as Warsh is speaking, the Bureau for Labour Statistics announces its annual nonfarm payroll benchmark revisions. Consensus expects a close to +200k revision, versus a prior revision of -911k. Any surprises here could be noteworthy."

"We presume Warsh will do his utmost to avoid upsetting the bond market today – perhaps by avoiding monetary policy altogether – and see DXY trading in a quiet 99.00-99.30 range."

(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 remains below 0.7000 amid light trading

AUD/USD fills a modest bearish gap on Monday, but remains below 0.7000 in the Asian session amid holiday-thinned liquidity. The US Dollar attempts a bounce even as US bond yields pull back from multi-year highs, limiting the pair. Moreover, diminishing odds of another RBA rate hike in November cap the Aussie.

USD/JPY hovers above 158.00 amid Japan/ US holiday

USD/JPY extends its range-bound price action into a new week, trading above 158.00 as bulls remain on high alert amid speculation that authorities will step in to prop up the Japanese Yen. Meanwhile, softer US bond yields keep US Dollar bulls on the back foot and cap the pair's upside. However, geopolitical uncertainties could limit losses for the safe-haven buck amid thin liquidity due to a holiday in Japan and the US.

Gold sticks to modest losses; seems vulnerable below $4,200 on Fed hike bets

Gold extends its intraday retracement slide from a one-week high, hitting a fresh daily low around $4,170 during the early European session. The US Dollar attracts fresh buyers after a modest downtick amid the US Federal Reserve's hawkish outlook, which, in turn, is seen as weighing on the non-yielding bullion.

Bitcoin struggles as ETF outflows, geopolitical uncertainty weigh

Bitcoin hovers around $83,600 on Monday after a 3.1% correction last week. US-listed spot ETFs recorded an outflow of $681.10 million last week, snapping the three-week inflow streak. Geopolitical uncertainty and mixed signals keep investors cautious.

The week ahead: A critical week as earnings and CPI test market

The Oil price is relatively stable this morning, and US and European stock markets are poised to open higher, as risk sentiment shrugs off an escalation in the Middle East and concerns about rising bond yields.

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?