A volatile FX session ends peacefully
Gary Christie August 27, 2020 9:58 PM
Fed Chair Powell hints of continued low rates for some time. USD/JPY trades up.
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
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.