A volatile FX session ends peacefully

Fed Chair Powell hints of continued low rates for some time. USD/JPY trades up.

Charts (6)

The US Dollar was bearish against most of its major pairs on Thursday with the exception of the JPY. On the U.S. economic data front, U.S. GDP rose to -31.7% on quarter in the second quarter second reading (-32.5% expected), from -32.9% in the second quarter advanced reading. Initial Jobless Claims decreased to 1,006K for the week ending August 22nd (1,000K expected), from a revised 1,104K in the previous week. Continuing Claims fell to 14,535K for the week ending August 15th (14,400K expected), from a revised 14,758K a week earlier. Pending Home Sales rose 5.9% on month in July (+2.0% expected), compared to +15.8% in June. 

Fed Chair J. Powell spoke at the Jackson Hole Economic Policy Symposium where he outlined the Fed's newly revised consensus statement. Firstly, the Fed removed its maximum employment target and instead aims for maximum employment as a broad based goal. Secondly, the Fed seeks to achieve inflation that averages 2%, rather than a 2% target. Although the changes are subtle, it shows the severe impact of the coronavirus on a US economy that was already slowing prior to pandemic.        

On Friday, Personal Income for July is expected to slip 0.4% on month, compared to -1.1% in June. Wholesale Inventories for the July preliminary reading are expected to decline 0.9% on month, compared to -1.4% in the June final reading. Personal Spending for July is expected to rise 1.5% on month, compared to +5.6% in June. Market News International's Chicago Purchasing Managers' Index for August is expected to advance to 52.6 on month, from 51.9 in July. Finally, the University of Michigan's Consumer Sentiment Index for the August final reading is expected to remain at 72.8 on month, in line with the August preliminary reading.              

The Euro was bearish against most of its major pairs with the exception of the JPY. In Europe, the European Central Bank has reported M3 Money Supply growth in July at +10.2% (vs +9.2% on year expected). France's INSEE has posted August indicators on business confidence at 91 (vs 88 expected) and manufacturing confidence at 93 (vs 86 expected).

The Australian dollar was bullish against all of its major pairs.

The US 10 year yield jumped 5.4bps  to 0.742%.

Gold dropped $25.83 (-1.32%) to $1928.63.

WTI Crude Oil fell $0.40 (-0.92%) to $42.99.

A volatile start to the U.S. Forex trading session ahead of Fed Chair J. Powell's speech at the Economic policy Symposium ended in a relatively flat session when the closing bell rang. The largest FX pair mover was the USD/JPY which gained 58 pips to 106.57. The pair can't seem to break away from its short-term consolidation inside a bearish trend channel. A break above 107.15 would call for a test of the channel resistance line while a break below 105.10 support would call for a continuation lower to test August lows at 104.20.

Source: GAIN Capital, TradingView

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