General market theme
Investors were focused on the Jackson Hole symposium at the end of the week, waiting for fresh news and guidance from the Fed, and it seems that they were not disappointed. During her speech, Janet Yellen made her case on why further rate hikes should be expected this year, and along her other Fed officials also built a bullish case for the US currency.
The reaction from the dollar was broad gains across the board in the midst of increased volatility, as some comments made from Fed Vice Chairman Fischer caught investors off guard. The focus now turns to this week’s NFP report, where if the figures print bullish we will have yet another reason to expect a higher interest rate policy from the US this year.
Price action highlights
The euro was rather volatile during Friday’s session, with the currency spiking higher at some point and almost making it to the 1.1350 level, but it ended the day trading below the 1.1200 level. Bullish Fed commentary has contributed to the decline as the dollar received support from key Fed officials, and given the recent weak Eurozone data the single currency was vulnerable.
Overnight trading brought the euro slightly higher to trade around the 1.1200 level again, but the weakness in the pair is evident, and we now need to wait for this week’s euro-related data and US NFP report to confirm whether this is a more medium-term breach of the 1.1200 area.
The cable was one of the best performing currencies against the dollar on Friday, and even though it ended the day lower against the advancing US currency, it managed to limit its losses to a small extent.
The pound seems to be trading well after the Brexit decision, and given the recent figures from the UK that showed that the domestic economy is holding its own, the UK currency managed to remain above the 1.3100 level on the back of Friday’s price action. If the dollar continues to advance, we could see a break below this level as the focus now turns to the upcoming NFP report from the US.
Focus of the day
The calendar is relatively empty today, and apart from the some US Income and Spending figures there’s nothing else really to excite traders. The UK markets are closed for the Summer Bank Holiday, hence we expect limited price action and we think that the sentiment will remain the same as last Friday, with the dollar trying to build some momentum ahead of the US employment report later this week.
Disclaimer: The information provided by InvestingBetter.com should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. InvestingBetter.com are merely providing this information for your general information. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite.
InvestingBetter.com and/or its owners will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained on InvestingBetter.com. InvestingBetter.com does not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.