Monex: Risk rally slows down, dollar recovers slightly

Monex: Risk rally slows down, dollar recovers slightly

25 augustus 2021

Valuta
Geld dollar euro (03)

This is a commentary by Ima Sammani, FX Market Analyst at Monex Europe, on the USD, EUR and GBP exchange rates.

USD

The risk rally started to run out of steam this morning and the dollar pared back a small part of its losses against commodity currencies and EMFX this morning.

Multiple narratives are in play at the moment, with progress on fiscal spending in the US allowing progress on the US$550bn infrastructure package being weighed against the sharp rise in US Covid cases. At the same time, US equities continue to rally with the Nasdaq and S&P 500 hitting another all-time high this morning.

Today’s Durable Goods Orders from July may move the mixed broad dollar price action to a clearer direction at 14:30 CET.

EUR

The euro traded in very narrow ranges against USD, GBP, JPY and CHF yesterday while weakening against commodity-linked currencies which benefited from the extended gains in oil markets.

Yesterday’s comments by European Central Bank executive board member Isabel Schnabel failed to excite the euro as she reiterated the ECB is not concerned about current high inflation rates which they estimate “will fall significantly as of next year”.

She added that current high inflation rates do not mean that monetary policy will be tightened soon, but this is no news to markets as the central bank raised the bar for any form of policy tightening in their July meeting when they said inflation has to reach the 2% target not just at the end of the forecast horizon but also sustainably throughout it.

For today, focus turns to the Ifo survey at 10:00 CET which is set to show deteriorating expectations but a modest uptick in the current assessment. Risks are tilted to the downside with concerns around the delta spread having dominated markets in the past month.

GBP

Sterling continues to trade in range-bound with very few domestic drivers impacting the currency. Price action in the pound can mostly be pinned on broader risk sentiment, although some focus has been on data from jobs site Indeed.

The data shows that Britain’s construction, manufacturing and food preparation industries are pushing wages higher across the economy due to a shortage of workers to fill available jobs. Today’s calendar is blank for the UK, and GBPUSD is expected to continue to trade in narrow ranges in today’s session.

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