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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,

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 Yellen at 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

GMTCCYEVENTACTEXPPREV
23:30JPYNatl CPI (YoY) (JUL)-0.4%-0.4%-0.4%
23:30JPYNatl CPI Ex Fresh Food (YoY) (JUL)-0.5%-0.4%-0.4%
23:30JPYNatl CPI Ex Food, Energy (YoY) (JUL)0.3%0.4%0.5%
23:30JPYTokyo CPI (YoY) (AUG)-0.5%-0.4%-0.4%
23:30JPYTokyo CPI Ex-Fresh Food (YoY) (AUG)-0.4%-0.4%-0.4%
23:30JPYTokyo CPI Ex Food, Energy (YoY) (AUG)0.1%0.3%0.2%
05:00JPYNatl CPI Ex Food, Energy, 2014 Tax Hike (YoY) (JUL)-0.7%0.7%

European Session

GMTCCYEVENTEXPPREVIMPACT
06:00EURGerman GfK Consumer Confidence (SEP)1010Low
06:45EURFrench GDP (YoY) (2Q P)1.4%1.4%Medium
06:45EURFrench GDP (QoQ) (2Q P)0.0%0.0%Medium
08:00EUREurozone M3 Money Supply (YoY) (JUL)5.0%5.0%Low
08:30GBPGDP (QoQ) (2Q P)0.6%0.6%Medium
08:30GBPGDP (YoY) (2Q P)2.2%2.2%Medium
08:30GBPPrivate Consumption (QoQ) (2Q P)0.8%0.7%Low
08:30GBPGovernment Spending (QoQ) (2Q P)0.3%0.5%Low
08:30GBPGross Fixed Capital Formation (QoQ) (2Q P)0.4%-0.1%Low
08:30GBPExports (QoQ) (2Q P)0.7%-0.4%Low
08:30GBPImports (QoQ) (2Q P)0.8%0.1%Low
08:30GBPIndex of Services (MoM) (JUN)0.1%-0.1%Low
08:30GBPIndex of Services (3M/3M) (JUN)0.4%0.3%Low
08:30GBPTotal Business Investment (QoQ) (2Q P)-0.9%-0.6%Low
08:30GBPTotal Business Investment (YoY) (2Q P)--0.8%Low

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EUR/USD1.12031.12421.12631.12811.13021.13201.1359
GBP/USD1.30181.31131.31531.32081.32481.33031.3398

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

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