USD continues to strengthen after yesterday saw the PBoC act to stop the rot, with gains capped by Fed’s Dudley suggesting a September rate hike is less appealing
USD has been the notable mover in FX markets today as the greenback continues to claw back losses seen on `Black Monday`, albeit coming off its best levels after Fed’s Dudley played down the possibility of a September rate hike. The USD continued to gain against its major counterparts, as was the case yesterday, bolstered by action taken by the PBoC as well as higher than expected US data. After the PBoC cut rates yesterday, today saw further liquidity boosting through CNY 140bln of SLO loans. As well as the situation in China, USD was further bolstered by better than expected durable goods orders (M/M 2.0% vs. Exp. -0.4%). The USD resided in firm positive territory throughout the day; however, comments from Fed’s Dudley suggesting a September rate-hike is less appealing and global market turmoil may influence US employment. We did see the index fall shortly before the European close.
Away from the USD, EUR has also continued yesterday’s trend lower, after Monday saw EUR/USD touch its highest level since January at the 1.1700 level. EUR continued to weaken amid the more positive sentiment due to its use as a funding currency. Today has also seen a continuation of yesterday’s unwinding of safe haven bids in JPY, with USD/JPY reclaiming the 119.00 handle and trading in close proximity to 120.00 prior to the aforementioned Fed’s Dudley comments.
Commodities currencies continued to weaken today amid bearish sentiment in the commodity complex, with the likes of CAD and AUD weaker as WTI futures traded in the red despite the larger drawdown than expected in DoE crude oil inventories (-5452K vs. Exp. 1450K, Prev. 2620K).
Looking ahead, tomorrow’s highlights include notable US data in the form of the secondary reading of US Q2 GDP, personal consumption and spending and weekly jobs numbers as well as the first day of the Jackson Hole symposium.