We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bullish
GBP/USD
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
USD/JPY
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Mixed
Oil - US Crude
Mixed
Bitcoin
Bullish
More View more
Real Time News
  • The Singapore Dollar is driven by the Monetary Authority of Singapore, which manages exchange rate instead of short-term interest rates. Learn more on the $SGD and how to trade it. Get your update from @ddubrovskyFX here: https://t.co/eWLM9XZs5Y https://t.co/OWuwGML4Ch
  • RT @FT: Huawei admits that US sanctions are hurting https://t.co/GIT4XSfszx
  • RT @WSJecon: Mexico’s inflation eased in September, coming in line with the Bank of Mexico’s 3% target for the first time in three years ht…
  • My phone's decided to give up the ghost and I've been phoneless for 24 hours. Not coincidentally, I've been a machine tackling errands around the house. What a time to be alive.
  • #Gold remains stuck in a range as a range of conflicting forces battle and fail to take control of price action. Get your $gld market update from @nickcawley1 here: https://t.co/pw7UjkUyqH $XAUUSD https://t.co/YD8L6knjhe
  • Geopolitical developments send oil prices soaring or falling. Get your market update here: https://t.co/0znHZPvPON https://t.co/s358dvMBeR
  • Currency markets may be battered by breakneck volatility if a slowdown in global economic growth triggers a collapse in the fragile market for collateralized loan obligations (CLOs). Get your market update from @ZabelinDimitri here:https://t.co/KfjjtaXs7b https://t.co/sWeSlv33pb
  • The #Dow Jones and #Nasdaq 100 will await key earnings from some of the world’s largest manufacturers and tech companies while the #DAX grapples with freshly-imposed tariffs. Get your equities market update from @PeterHanksFX Here: https://t.co/u2lG19JFt3 https://t.co/OHs4rQEH7T
  • Crude #oil prices are consolidating above a key support zone we’ve been tracking for more-than three months now. Get your market update from @MBForex here: https://t.co/XaACvEpLG4 #OOTT https://t.co/XjmjUt4Par
  • Why trade with Bollinger Bands®? Find out as a day trader, how you can use it to your advantage:https://t.co/dwODDDSsFi @WVenketas https://t.co/SYduJ5k9mL
US Dollar Seen Higher as Bernanke Disappoints, Euro Crisis Festers

US Dollar Seen Higher as Bernanke Disappoints, Euro Crisis Festers

2012-08-28 07:33:00
Ilya Spivak, Sr. Currency Strategist
Share:

Major Currencies vs. US Dollar (% change)

20 Aug 2012 – 24 Aug 2012

US_Dollar_Seen_Higher_as_Bernanke_Disappoints_Euro_Crisis_Festers_body_Picture_5.png, US Dollar Seen Higher as Bernanke Disappoints, Euro Crisis Festers

Talking Points

  • All Eyes on Fed Chair Bernanke’s Jackson Hole Speech Amid Stimulus Hopes
  • US Manufacturing Surveys, Beige Book to Set the Tone for QE3 Expectations
  • Euro May Suffer on EU Policymakers’ Dithering as Markets Grow Frustrated

Although correlations have broadly weakened in the late-summer trading lull, sentiment trends continue to look like the leading driver for most major currency pairs. USDJPY is a lone exception, although a strong relationship with the 10-year Treasury bond yield still anchors the pair to risk appetite given the safe-haven status of US debt. This puts familiar big-picture themes – the global economic slowdown and the Eurozone debt crisis – at the forefront once again.

On the growth side of the equation, all eyes will be on Friday’s Jackson Hole symposium and a speech from Fed Chairman Ben Bernanke. The central bank chief used the venue to signal QE2 in 2010 and traders are speculating that the third round of asset purchases may emerge this time around. Last week, a dovish set of minutes from Augusts’ FOMC sit-down fueled bets on imminent accommodation, but dismissive comments from St. Louis Fed President James Bullard quickly poured water to the doves’ exuberance. Bullard said the minutes were dated in light of the improvement in US economic data through July and August, hinting the Fed may not see the landscape as warranting a reboot of asset purchases. US economic data has notably improved relative to expectations recently, reinforcing Bullard’s position.

Faced with these conflicting cues, traders will closely monitor next week’s stock of manufacturing survey data from the Richmond, Kansas City and Chicago Fed branches to set the stage for Bernanke’s speech. The Beige Book survey of regional economic conditions and Augusts’ Consumer Confidence reading will likewise meet with close scrutiny from investors. On balance, an unequivocal nod toward QE3 seems unlikely. Medium-term inflation expectations remain reasonably anchored near the Fed’s target 2 percent rate and borrowing is materially cheaper than it was when QE2 emerged, with Treasury bond yields sitting near record lows. That means the Fed is likely to reserve QE3 as an available tool in its arsenal in the event that the mess in Europe triggers another credit crunch akin to the aftermath of the bankruptcy of Lehman Brothers in 2008.

Turning to the Eurozone, last week’s anticlimactic developments in Greece and further stalling from the ECB on its bond-market support program revealed investors’ frustration with a lack of directional cues – whether positive or negative – from Eurozone officials. Markets may be approaching a juncture where price action forces policy once again, with risk aversion breaking out amid signs of continued dithering. The focus is now on a formal review of Portugal’s EU/IMF bailout program and a set of bond auctions from Spain and Italy (where average yields and bid-to-cover readings will be closely monitored as a gauge of funding stress). With little in terms of a breakthrough likely on the horizon, a round of risk aversion may be brewing to punish policymakers’ foot-dragging.

EURO

US_Dollar_Seen_Higher_as_Bernanke_Disappoints_Euro_Crisis_Festers_body_Picture_6.png, US Dollar Seen Higher as Bernanke Disappoints, Euro Crisis Festers

Source: Bloomberg

Key Event Risk

DAY

GMT

EVENT

EXP

PREV

IMPACT

28 AUG

-

EU/IMF Review of Portugal’s Bailout Program

-

-

Medium

28 AUG

8:30

Spain to Sell 84- and 168-day Bills

-

-

Medium

29 AUG

9:00

Italy to Sell €9B in 6-month Bills

-

-

Medium

29 AUG

12:00

German CPI (YoY) (AUG P)

1.9%

1.7%

Medium

30 AUG

9:00

Italy to Sell €7.5B in 5- and 10-Year Bonds

-

-

High

30 AUG

7:55

German Unemployment Change (AUG)

7K

7K

Medium

31 AUG

9:00

Eurozone CPI Estimate (YoY) (AUG)

2.5%

2.4%

Medium

BRITISH POUND

US_Dollar_Seen_Higher_as_Bernanke_Disappoints_Euro_Crisis_Festers_body_Picture_7.png, US Dollar Seen Higher as Bernanke Disappoints, Euro Crisis Festers

Source: Bloomberg

Key Event Risk

DAY

GMT

EVENT

EXP

PREV

IMPACT

30 AUG

8:30

Mortgage Approvals (JUL)

47.0K

44.2K

Medium

31 AUG

8:30

Nationwide House Prices (MoM) (AUG)

0.1%

-0.7%

Medium

31 AUG

8:30

Nationwide House Prices (YoY) (AUG)

-2.2%

-2.6%

Medium

JAPANESE YEN

US_Dollar_Seen_Higher_as_Bernanke_Disappoints_Euro_Crisis_Festers_body_Picture_8.png, US Dollar Seen Higher as Bernanke Disappoints, Euro Crisis Festers

Source: Bloomberg

Key Event Risk

DAY

GMT

EVENT

EXP

PREV

IMPACT

30 AUG

23:15

Markit/JMMA Manufacturing PMI (AUG)

-

47.9

Medium

30 AUG

23:30

Jobless Rate (JUL)

4.3%

4.3%

Medium

30 AUG

23:30

National CPI (YoY) (JUL)

-0.3%

-0.2%

Medium

30 AUG

23:50

Industrial Production (MoM) (JUL P)

1.7%

0.4%

High

30 AUG

23:50

Industrial Production (YoY) (JUL P)

1.8%

-1.5%

High

CANADIAN DOLLAR

US_Dollar_Seen_Higher_as_Bernanke_Disappoints_Euro_Crisis_Festers_body_Picture_9.png, US Dollar Seen Higher as Bernanke Disappoints, Euro Crisis Festers

Source: Bloomberg

Key Event Risk

DAY

GMT

EVENT

EXP

PREV

IMPACT

31 AUG

12:30

GDP (MoM) (JUN)

0.1%

0.1%

High

31 AUG

12:30

GDP (YoY) (JUN)

2.2%

2.4%

High

31 AUG

12:30

Quarterly GDP – Annualized (2Q)

1.6%

1.9%

High

AUSTRALIAN DOLLAR

US_Dollar_Seen_Higher_as_Bernanke_Disappoints_Euro_Crisis_Festers_body_Picture_10.png, US Dollar Seen Higher as Bernanke Disappoints, Euro Crisis Festers

Source: Bloomberg

Key Event Risk

DAY

GMT

EVENT

EXP

PREV

IMPACT

30 AUG

1:30

Building Approvals (MoM) (JUL)

-5.0%

-2.5%

Medium

30 AUG

1:30

Building Approvals (YoY) (JUL)

6.0%

10.2%

Medium

31 AUG

1:30

Private Sector Credit (MoM) (JUL)

0.4%

0.3%

Medium

31 AUG

1:30

Private Sector Credit (YoY) (JUL)

4.4%

4.4%

Medium

NEW ZEALAND DOLLAR

US_Dollar_Seen_Higher_as_Bernanke_Disappoints_Euro_Crisis_Festers_body_Picture_11.png, US Dollar Seen Higher as Bernanke Disappoints, Euro Crisis Festers

Source: Bloomberg

Key Event Risk

DAY

GMT

EVENT

EXP

PREV

IMPACT

29 AUG

22:45

Building Permits (MoM) (JUL)

3.0%

5.7%

Medium

30 AUG

1:00

NBNZ Business Confidence (AUG)

-

15.1

Medium

31 AUG

3:00

Money Supply M3 (YoY) (JUL)

-

5.7%

Low

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.