Dollar is not stable because of political developments awaiting the FOMC meeting on Wednesday
The Dollar finished the week lower following a weak inflation report which could prevent the Fed from raising rates again this year. US CPI rose 0.1% in July against economist’s median expectation of 0.2%. This followed Thursday weaker-than-forecast producer price report.
US July Headline CPI: 0.1% against a forecast of 0.2%. June’s Headline CPI was 0.0%
US July Core CPI: 0.1% against a forecast of 0.2% and June’s 0.1%.
Wall Street stocks rose while volatility eased as relative calm returned ahead of the weekend. The US S&P 500 rallied 0.23 % while the DOW closed 0.07% higher. Global equities were mixed.
USD/DXY – The Dollar Index closed 0.34% down at 93.101 against 93.40 Friday and 93.48 a week ago.
EUR/USD – led currencies higher to end at 1.1823 (1.1773 Friday)
USD/JPY – mild losses to 109.15 at the NY close, little-changed from 109.25 Friday.
GBP/USD – closes up at 1.3010 (1.2977 Friday).
AUD/USD –climbs off it’s lows to finish higher at 0.7895 from 0.7875 Friday.
NZD/USD – ends up to close at 0.7320 (0.7275).
The tepid US inflation report has taken the steam out of the Dollar’s rebound. The easy one way move is over with. We should see consolidation today with more two way trade. Tensions between North Korea and the US are still elevated and this will remain a focus. The week ahead sees central bank meeting minutes (RBA, FED FOMC, ECB) and economic data releases.
Events and economic data releases today:
New Zealand Q2 Headline and Core Retail Sales (GMT 10.45 pm, Aug 13/Local Time 8.45am, Aug 14) No expectations were given. NZ Headline Retail Sales in Q1 rose 1.5% while Core rose 1.2%
Japan Preliminary Q2 GDP (GMT 11.50 pm, Aug 13/Local Time 9.50 am, Aug 14) – Annualised expected at 2.5% from Q1 1.0%
China July Industrial Production, Retail Sales and Fixed Asset Investment (GMT 2 am, Aug 14/Local Time 12 pm, Aug 14) – Industrial Production: median forecast 7.2% from previous 7.6%.
Retail Sales: median forecast 10.8% from previous 11%. Fixed Asset Investment: median forecast 8.6% from 8.6%
Euro Zone June Industrial Production: (GMT 9 am, Aug 14/Local Time 7 pm, Aug 14) – median forecast: -0.4 % from previous 1.3%.
This week is heavy in terms of economic data and central bank meeting minutes releases. Geopolitical tensions remain high. The event risks ahead will see volatile trading conditions. Market positioning from the latest CFTC/Reuters report for the week ended August 8 shows that speculators increased their overall short Dollar positions. It’s the breakdown of the individual currencies that will is of interest.
EUR/USD – closed on a strong note against the Dollar at 1.1824. Today sees the release of Euro Zone Industrial Production data for June. Economists are expecting a drop of 0.4 to 0.5% to a rise of 0.2% from the previous rise of 1.3%. That’s a wide range of expectations. A positive reading close to 0.2% would see the Euro test higher initially. A fall of 0.5% would push the Single Currency lower. EUR/USD has immediate resistance at 1.1850 (overnight high 1.1849). Support can be found at 1.1790. Likely range 1.1785-1.1845. Sell rallies.
USD/JPY – The Dollar stabilized after a volatile session saw a session low of 108.73 to finish at 109.15. The political tension between Pyongyang and Washington has seen risk-aversion rise which has favored the Japanese currency. Markets seem to ignore the fact that geographically, Japan is the closest industrial nation to North Korea. And within a direct striking distance of any missile attacks. Over the weekend, the yield on the US Ten Year Treasury fell to 2.19% from 2.20 %. The Japanese Ten Year JGB yield was unchanged at 0.05%. Immediate support for USD/JPY lies at 109.00 and at 108.75. Resistance can be found at 109.40/50 (the overnight high was 109.50). Japanese Q2 Preliminary GDP is due out today. Likely range 108.90-109.90.
GBP/USD – Sterling finished higher due to a generally weaker US Dollar. The week ahead sees UK PPI, CPI, the UK Labour market report and Retail Sales data. GBP/USD has immediate resistance at 1.3030. There is immediate support found at 1.2985 and 1.2975. Likely range 1.2980-1.3040.
AUD/USD – the support at 0.7840/50 provided good support and the currency held those levels well. AUD/USD closed at 0.7895 after trading to an overnight high of 0.7909. The RBA releases its latest monetary policy meeting minutes tomorrow. Immediate resistance for the Aussie lies at 0.7910/20. In spite of an overall weaker US Dollar the Aussie could not make much headway. However, the support remains strong around the 0.7850 area. Likely range 0.7870-0.7920. Sell rallies.
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Dow Jones – Back below the 22,000 since the first time it broke through the level in August. The Futures of the Dow Jones show high levels of volatility as the VIX has reached higher after the geopolitical tensions.