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US Dollar May Rise on Yellen Speech at Jackson Hole

US Dollar May Rise on Yellen Speech at Jackson Hole

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • US Dollar may rise as Yellen fuels rate hike bets with Jackson Hole speech
  • Aussie, NZ Dollars probably most vulnerable to hawkish Fed outlook shift
  • British Pound may not find strong direction cues in 2Q UK GDP revision

The Australian and New Zealand Dollars outperformed in otherwise quiet overnight trade. The moves mirrored a pullback in US bond yields, hinting the rate-sensitive currencies found support amid pre-positioning for a much-anticipated speech from Fed Chair Janet Yellenat the Jackson Hole Symposium. Traders suspect the remarks may prove to be a major inflection point for US monetary policy.

On balance, markets appear to be setting up for a relatively hawkish outcome, a view that seems to find inspiration in last week’s round of Fed-speak. The priced-in probability of a rate hike before year-end implied in Fed Funds futures has conspicuously grown to 57.4 percent from 47.3 percent just a week ago. Comments reinforcing this up-shift are likely to boost the US Dollar, with higher-yielding commodity bloc currencies likely vulnerable to outsized selling pressure.

A revised set of second-quarter UK GDP figures headlines the economic calendar in European hours. Expectations point to confirmation of preliminary data showing the economy added 0.6 percent in the three months through June. The report seems too backward-looking to drive strong British Pound momentum considering it mostly covers a period preceding the “Brexit” referendum. Indeed, the BOE has already topped up stimulus in response to the post-vote landscape and now seems to be in wait-and-see mode, so the practical forward-looking implications of today’s release appear to be limited at best.

What do retail FX traders’ buy and sell decisions hint about current price trends? Find out here!

Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

23:30

JPY

Natl CPI (YoY) (JUL)

-0.4%

-0.4%

-0.4%

23:30

JPY

Natl CPI Ex Fresh Food (YoY) (JUL)

-0.5%

-0.4%

-0.4%

23:30

JPY

Natl CPI Ex Food, Energy (YoY) (JUL)

0.3%

0.4%

0.5%

23:30

JPY

Tokyo CPI (YoY) (AUG)

-0.5%

-0.4%

-0.4%

23:30

JPY

Tokyo CPI Ex-Fresh Food (YoY) (AUG)

-0.4%

-0.4%

-0.4%

23:30

JPY

Tokyo CPI Ex Food, Energy (YoY) (AUG)

0.1%

0.3%

0.2%

05:00

JPY

Natl CPI Ex Food, Energy, 2014 Tax Hike (YoY) (JUL)

-

0.7%

0.7%

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

06:00

EUR

German GfK Consumer Confidence (SEP)

10

10

Low

06:45

EUR

French GDP (YoY) (2Q P)

1.4%

1.4%

Medium

06:45

EUR

French GDP (QoQ) (2Q P)

0.0%

0.0%

Medium

08:00

EUR

Eurozone M3 Money Supply (YoY) (JUL)

5.0%

5.0%

Low

08:30

GBP

GDP (QoQ) (2Q P)

0.6%

0.6%

Medium

08:30

GBP

GDP (YoY) (2Q P)

2.2%

2.2%

Medium

08:30

GBP

Private Consumption (QoQ) (2Q P)

0.8%

0.7%

Low

08:30

GBP

Government Spending (QoQ) (2Q P)

0.3%

0.5%

Low

08:30

GBP

Gross Fixed Capital Formation (QoQ) (2Q P)

0.4%

-0.1%

Low

08:30

GBP

Exports (QoQ) (2Q P)

0.7%

-0.4%

Low

08:30

GBP

Imports (QoQ) (2Q P)

0.8%

0.1%

Low

08:30

GBP

Index of Services (MoM) (JUN)

0.1%

-0.1%

Low

08:30

GBP

Index of Services (3M/3M) (JUN)

0.4%

0.3%

Low

08:30

GBP

Total Business Investment (QoQ) (2Q P)

-0.9%

-0.6%

Low

08:30

GBP

Total Business Investment (YoY) (2Q P)

-

-0.8%

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.1203

1.1242

1.1263

1.1281

1.1302

1.1320

1.1359

GBP/USD

1.3018

1.3113

1.3153

1.3208

1.3248

1.3303

1.3398

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

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

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