A respite for the Greenback

A respite for the Greenback 

Despite a break from the incessant waves of US dollar selling, there remains a skittish overtone in the currency markets as the fear of the unknown set’s in with US political uncertainty accentuating the current market unease. Treasuries traded down after a consensus PCE, but market sentiment quickly shifted driving prices up and yields down, as the market again emphasises the US political morass.

The US political crater and lack of fiscal stimulus from Washington will continue to be the primary catalyst for dollar declines. While the market is cautious about a possible USD risk reversal, searching for the key triggers are like looking for a black cat in a coal cellar.

US economic data had little impact on the December rate hike probabilities. But the fact remains investors believe the current political tumult in Washington will lessen the chances of another Federal Reserve rate hike in 2017

The perpetual Oil price roller coaster is adding to market jitters as WTI dropped 2.0% today on a Reuters report that OPEC production rose in July. Adding more fuel to the fire was the increase in US crude inventories reported by the American Petroleum Association at the end the NY session

Equities, on the other hand, continue to flourish as earning reports drive stocks to new highs. The Dow reached a new-all time high for a fifth consecutive session, nibbling at the key 22k mark

The Euro has traded marginally lower overnight but for the most part, has been trading sideways. The position overhang from month end activity with US payrolls around the corner has dealers adopting a more cautious tact as they look for more clues amidst the foggy US economic and political landscape.
Australian Dollar

While there was nothing particularly dovish in the RBA statement, there was also nothing that screamed AUD higher other than USD weakness. The Aussie has plunged lower overnight as the market is inferring that provided the currency remains elevated the RBA stays in the low-interest rate for the longer mode.

Japanese Yen

Very choppy session overnight as the Greenback traded with mixed sentiment. There was little news behind the overnight currency moves other than to speculate its a bout of nervous position nellies in summer thinned trading condition.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes