Headlines
- The US Dollar Index rose more than 2.5% from its monthly lows, with a break of the August opening-range pushing the DXY back into technical resistance.
- The Federal Reserve’s Jackson Hole Economic Policy Symposium is this week, and policymakers are expected to strike an aggressively hawkish tone.
US Dollar Review
The US dollar had its best week of 2022 last week, rising +2.3% to close at its highest weekly close of the year, according to the DXY Index. It is debatable how much of the rally was brought on by USD-specific factors.
The odds of a Fed rate hike have continued to rise, the US 2-year yield increased slightly but significantly, and volatility increased by the end of the week. The only components of the answer are these.
The British Pound, the Euro, and the Japanese Yen—the three currencies that make up the majority of the DXY Index—are each experiencing problems of their own, which is the main reason why the US Dollar gained strength.
EUR/USD rates fell -2.13%, GBP/USD rates fell -2.54%, and USD/JPY rates increased +2.54%. However, the Federal Reserve bears the primary responsibility for further USD strength in the coming days.
Expected US Economic Data Release
The US economic calendar is once again jam-packed with a dozen medium and “high” rated events after a lighter schedule through the middle of the month.
The Jackson Hole Economic Policy Symposium, particularly Fed Chair Jerome Powell’s speech on Friday, will probably take precedence despite the importance of the data releases.
- On Monday, August 22, at 12:30 GMT, the US Chicago Fed national activity index for July will be made public.
- On Tuesday, August 23, at 14 GMT, a report on US new home sales for July is expected. President Kashkari of the Minneapolis Fed will speak at 00:00 GMT.
- On Wednesday, August 24, weekly data on US mortgage applications will be made available at 11 a.m. GMT. The US Durable Goods Orders for July will be made public at 12:30 GMT. At 14 GMT, the July pending home sales report is due.
- The Jackson Hole Economic Policy Symposium hosted by the Fed will get underway on August 25. At 12:30 GMT, the US GDP report for the second quarter of 2018 and the number of weekly jobless claims will both be released.
- On Friday, August 26, the Jackson Hole Economic Policy Symposium of the Fed will resume. At 12:30 GMT, the US PCE price index, US personal income and spending data, and US retail inventories report will all be made public. The final US Michigan consumer sentiment report for August is due at 14 GMT, and Fed Chair Powell will speak at that time.
More Fed Rate Hikes Ahead?
A Fed rate hike is now more likely than it was previously. On August 1, a rate increase of 25 basis points was priced in through the end of 2022 with a 34% chance of a subsequent rate increase of 25 basis points (50-bps in total by the end of the year). With a 29% chance of a third 25-basis-point increase, rate increases of 50 basis points are currently fully discounted.
The market is obviously keeping an eye on the Fed because numerous policymakers have said that the cycle of rate hikes is still ongoing. The recent increase in the US Dollar is being supported by the perception of a more hawkish Fed.
Disclaimer:
All information has been prepared by TraderFactor or partners. The information does not contain a record of TraderFactor or partner’s prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may read it. Past performance is not a reliable indicator of future performance.
