USD Price Pressure Remains After Upbeat Data Prints; Markets Await FOMC
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US Dollar Price Talking Points
- Upbeat data prints out of the US did little to lift the US Dollar this morning after the ECB rate decision sent the Greenback off a multi-year high
- Markets now eye next week’s highly anticipated Federal Reserve meeting where markets are largely pricing in a 25-basis point rate cut
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The US Dollar climbed to a multi-year high at the start of this month as the world’s reserve currency strengthened against its major counterparts as global growth worries and trade tensions rile investors. The Dollar slid overnight in a continuation from the ECB rate decision where ECB head Draghi announced a restart to Europe’s Quantitative easing program which saw EURUSD whipsaw before treading higher. Investors now look toward next week’s Federal Reserve interest rate decision where a 25-basis point rate cut is largely expected with overnight swaps pricing a 98.1% chance of a quarter point cut.
US Dollar Basket via DXY- (1-min Chart)
After the overnight pullback in the aftermath of the ECB rate decision, the Dollar is now lifting modestly on upbeat US economic data, although the Greenback is still below pre-ECB levels and remains under pressure, the DXY Index is currently sitting at 98.23 in Friday morning trading. Advance US Retail sales rose 0.4% for August as US Consumers increased their purchases of autos. Business inventories also rose 0.4% for the month of July after coming in flat for June. Business inventories are a key component in calculating US GDP growth.
Another key market focus along with the Federal Reserve and other Central Banks is the US-China trade war which seems to hit a standstill as China buys US AG products and considers excluding national security matters from negotiations. The concerns around trade tensions were highlighted in this morning’s consumer sentiment report out of the University of Michigan. Although the headline figure beat with a reading of 92.0, concern about trade wars intensified with the report stating “concerns about the impact of tariffs on the domestic economy also rose in early September, with 38% of all consumers making spontaneous references to the negative impact of tariffs, the highest percentage since March 2018.”
CME Group FedWatch Tool
Trade war tensions now seem to be a persistent theme in the world economic landscape as the Federal Reserve now weighs it as a major headwind to future global growth. Chairman Powell highlighted the impacts on financial markets from these risks in his keynote speech last month in Jackson Hole, along with geopolitical risks from a hard Brexit and rising tensions in Hong Kong. Markets now await next weeks FOMC decision with both overnight swaps and the CME Group’s FedWatch tool largely pricing a cut.
--Written by Thomas Westwater, Intern Analyst for DailyFX.com
Contact and follow Thomas on Twitter @FxWestwater
DailyFX forecasts on a variety of currencies such as the US Dollar or the Euro are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.
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