General market theme
Limited price action in the major money markets during the first 24 hours of the week, and with the UK markets closed for the Summer Bank Holiday we don’t have much to talk about at the beginning of the week.
The US dollar remains in focus on the back of the Jackson Hole event, but what we’d like to note down is that investors are again not taking seriously what the Fed officials said.
Their intention to keep hiking rates and their goal for more than 1 rate hike this year doesn’t seem to convince traders, as we’re seeing a limited follow-through from the dollar after its Friday gains and a reaction higher from the major stock markets.
This Friday’s Non-Farm Payrolls report will either convince traders about Fed’s seriousness or disappoint them all together.
Price action highlights
The euro traded lower yesterday and almost reached the 1.1150 level while the dollar was still carrying momentum after Friday’s strong gains. The single currency remains under pressure, and while the pair is trading below the 1.1200 level the bias still points lower. We could see more losses as we move closer to Friday’s US employment report.
Any attempts to correct higher for the euro should be treated as opportunities to sell higher, as the prime scenario is that traders will look to load their pro-dollar positions ahead of this month’s NFP figures.
The cable edged lower as well yesterday, but spent most of the day trading sideways around the 1.3100 figure as there was little in terms of fresh news to drive price action during the past 24 hours.
The pound is under pressure as the dollar advances, and we could see further gains from the US currency as we move closer to Friday. If the pound breaks into fresh lows today we think that the downtrend could be extended a bit more, as former lows are situated around the 1.3000 area.
Focus of the day
A few interesting reports from around the globe in our calendar today that could spark some interest among traders.
Early in the morning the Mortgage Approvals report from the UK will be closely monitored, as the housing market was one of the main areas where the Brexit decision was expected to take a toll. Later in the day German inflation figures and the US Consumer Confidence reports are both important enough to drive price action for the rest of the day.
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