Monex: Dollar stijgt na hawkish uitlatingen vice-voorzitter Fed over tapering
Monex: Dollar stijgt na hawkish uitlatingen vice-voorzitter Fed over tapering
Hieronder volgt een kort commentaar in het Engels van Ima Sammani, valuta analist bij Monex Europe op de Amerikaanse dollar, euro en het Britse pond.
EUR
The euro was undermined by a stronger dollar in yesterday’s latter part of the trading session, as a cautious mood across markets kept the dollar buoyed around the US open. Eurozone retail sales from June showed a month-on-month expansion of 1.5% vs the expected 1.7%, however, the yearly figure overshot expectations and printed at 5.0% vs 4.4%. Yesterday’s mixed data didn’t move the needle for markets as a larger focus remains on broader risk sentiment. This morning’s session included a sharp expansion in German factory orders which also saw a muted EURUSD response, despite monthly figures more than doubling expectations by printing at 4.1% vs 2.0%. The lack of reaction in markets goes to show that market participants struggle to price a broad macro narrative amid heightened Covid risk, a lower growth outlook and seasonality-related poor liquidity conditions.
USD
Broad dollar dynamics were again in focus for FX markets yesterday. The correlation of fixed income price action with FX price action flipped in yesterday’s trading session, after Fed Vice Chair Clarida explicitly stated that the decline in US yields was quite pronounced. Whereas on Tuesday, a decline in the US 10-year and an initial drop in US equities gave the signal for markets to find shelter in the US dollar, yesterday’s rise in the 10-year above 1.18% following Clarida’s comments saw FX markets flood back into the dollar after a morning of losses as the Fed committee is turning incrementally more hawkish. The idea of growth concerns, a more dovish Fed, and ample liquidity weighing on US fixed income markets and the dollar was slowly pared back by Clarida’s comments yesterday. But with markets still awaiting a key Nonfarm Payrolls release on Friday, uncertainty over how to price the current economic outlook and timeline for Fed policy remains and will likely continue to provide volatility in FX markets. For now, the US bond market continues to provide more noise than signal on an intraday basis, with the broad US dollar arguably taking its cues from the equity market reaction instead.
GBP
It was another volatile day for GBPUSD yesterday as broad dollar dynamics continued to drive price action. Starting the morning off on the front foot, the pound soon slumped to post losses on the day after the broad US dollar posted a rebound after the Fed’s Vice Chair Clarida sounded hawkish at the margins. Today, the pound is back trading in the green as risk sentiment remains supported at the open of the European session. Despite trading in a 0.8% range over the past six trading sessions, GBPUSD could post a breakout and a new trend after today’s Bank of England meeting. Released at 13:00 CET, the initial policy statement and accompanying monetary policy report will garner the markets attention. Within the rate statement, investors will be looking at the vote split on ending the QE programme before the current year-end target, with a split of 6-2 or 7-1 the likeliest options to maintain the current policy. Any further dissent outside of that split will mean there is a new advocate of tighter monetary policy within the policy committee, which will be a net hawkish development for markets to digest. Within the MPR, investors will be looking at how much the inflation forecast is upgraded and how transitory the MPC deems the overshoot to be. On growth, the Bank’s forecasts are unlikely to change, but their assessment of how the health backdrop automatically limits economic activity will be key. Beyond this, markets will focus on any update on where the Bank now places the effective lower bound given that negative rates should be an operationally viable policy tool. This would allow the BoE more space to loosen policy in response to future shocks, and thus provide a lower target for the Bank rate at which the Bank’s stock of assets can be reduced - previously this benchmark was 1.5%. However, that is based on the assumption that the exit sequencing will be the same as after the financial crisis, but a review into tapering the Bank’s balance sheet before raising rates is underway. The results of which could be released today, although it isn’t our base case.