The US dollar gapped up against its FX trading counterparts over the weekend as Yellen’s Jackson Hole testimony turned out to be positive for the currency. While the Fed head didn’t commit to a rate hike timeline yet, she mentioned that tightening might happen earlier if the jobs market continues to show strong improvements. She also noted though that they could delay any policy adjustments if data remains weak.
Apart from that, she shared the underlying data components that the Fed is looking at when it comes to assessing labor market improvements. US new home sales data is due today and it might show a gain from 406K to 426K.
The euro lost a lot of ground after ECB Governor Draghi emphasized that the central bank is ready to ease further if inflationary pressures weaken. He also mentioned that the region also needs to undergo structural reform for the monetary and fiscal accommodation to be more effective. German Ifo business climate data is due today and a decline from 108.0 to 107.1 is eyed. A weaker than expected reading might push the euro lower against its FX trading counterparts while a strong figure could lead to a quick bounce.
FX Trading Fundamental Analysis
The pound gave up ground to the dollar but recovered to the Japanese yen, as there were no major announcements from the BOE. For now, traders are still digesting the minutes of the latest BOE meeting in line with the recent weak CPI and retail sales releases, trying to figure out if a rate hike this year is possible or not. UK banks are on holiday today, which might leave pound pairs in FX trading consolidation.
The franc followed the euro’s footsteps and weakened to the dollar, as there were no reports released from Switzerland on Friday. There are still no reports due from the country today so the currency might still take its cue from the euro or FX trading risk sentiment.
The yen lost a lot of ground to its FX trading partners as BOJ Governor Kuroda hinted that they are ready to ease further if needed. He acknowledged improvements in the Japanese economy but said that they are seeing weak wage growth and an increasing reliance on part-time work. There are no reports due from Japan today, leaving yen pairs sensitive to risk sentiment.
The comdolls caved to dollar strength but some were able to take advantage of yen weakness, particularly the Australian dollar. Data from Canada has been mixed, with CPI figures coming in below estimates and retail sales data showing strong results. Headline CPI is down by 0.2% while core CPI is down by 0.1%. Headline retail sales showed a 1.5% gain while core retail sales printed a 1.1% increase. There are no reports due from the comdoll economies today.
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