US Dollar losses mount, almost erasing all 2024 gains in silent siege

LONDON (August 20) The US Dollar (USD) extends losses on Tuesday after getting sucker-punched on Monday, with all eyes on the US Federal Reserve Jackson Hole Symposium in Wyoming, where Fed Chairman Jerome Powell is set to deliver a pivotal speech. A mixture of risk-on and a very slim data calendar in the runup to Jackson Hole convinced traders that a recession scenario could be avoided and the US economy is on the path to a soft landing. Outside the US, news that Israel could commit to the US ceasefire proposal is also reducing the safe-haven flows toward the Greenback. 

On the economic data front, again a very light calendar is ahead on Tuesday, although some sort of cautiousness must be upheld. With all stars aligning for a weaker US Dollar, any comment or data point could see an aggressive reversal of Monday’s moves. With the runup towards the speech from Fed Chairman Powell on Friday, nearly all Fed members will have issued their personal outlook about the interest-rate path, which means still a lot of market-moving comments could be on the way. 

Daily digest market movers: Comments underway

• China’s government is weighing whether to let local governments issue bonds to buy homes, according to Bloomberg. 
• At 12:55 GMT, the Redbook Index for the week ending August 16 is set to be released. The previous reading showed a 4.7% increase over a one-year period.
• In the runup towards Jackson Hole, nearly all Federal Open Market Committee (FOMC) members will have a window of opportunity to have their say on monetary policy. This Tuesday two members are set to issue comments:
  • Federal Reserve Bank of Atlanta President Raphael Bostic gives some remarks at the Atlanta Fed's Payment Inclusion Forum in Atlanta.
  • Federal Reserve Vice Chair for Supervision Michael Barr participates in a discussion about cybersecurity at the Joint Financial and Banking Information Infrastructure Committee-Financial Services Sector Coordinating Council Meeting in Washington, D.C.
• Asian equity markets are mixed, with Japanese indices up over 1% while Chinese equities are on the back foot. European and US equities are continuing the positive tone from Monday. 
• The CME Fedwatch Tool shows a 77.5% chance of a 25 basis points (bps) interest rate cut by the Fed in September against a 22.5% chance for a 50 bps cut.  Another 25 bps cut (if September is a 25 bps cut) is expected in November by 59.3%, while there is a 35.4% chance that rates will be 75 bps below the current levels and a 5.2% probability of rates being 100 basis points lower. 
• The US 10-year benchmark rate trades at 3.87% and is looking for direction after last week’s dip. 

FXStreet