US Dollar Muted, German Recession Unavoidable, USDTRY Soars - US Market Open

2019-07-08 13:05:00

MARKET DEVELOPMENT – US Dollar Muted, German Recession Unavoidable, USDTRY Soars

DailyFX 2019 FX Trading Forecasts

USD: Major FX pairs are once again holding relatively tight ranges with the USD mixed across the G10 space. The greenback has held onto its NFP inspired gains with the basket consolidating above the 97.00 handle as US 10yr yields maintain a foothold above 2%. Little in the way of notable events today with eyes focusing on Fed Chair Powell’s testimony on Wednesday.

EUR: Subdued price action for the Euro which is hovering near Friday lows. Eyes on for a break below 1.12, which could exacerbate further losses in the pair, however, option markets imply that any losses would be gradual. Sentix investor confidence index plunged in July, while the sub-index for Germany fell to the lowest level in a decade, which in turn has seen the Sentix Director state that a recession in Germany appears to be unavoidable. Elsewhere, dovish commentary from ECB’s Couere dented the Euro after noting that the central bank could restart QE if needed.

TRY: President Erdogan’s decision to fire its central bank chief provided yet another reminder that central bank independence in Turkey is non-existent. In reaction to this, USDTRY gapped higher by 2.8%. While it is evident who has control over monetary policy, risks will turn towards whether the central bank delivers faster and larger rate cuts than what the markets currently expect. Therefore, the combination of political uncertainty keeps USDTRY risks tilted to the upside.