Apprehension and lack of commitment lead to the overnight USD roller coaster. After the powerful response to an FOMC statement that was mostly unchanged other than some minor tweaks on the inflation language, a case of the jitters set in. More so for those that chased the euro topside and after realising there was nowhere to go but down when momentum stalled, panic ensued after surprisingly strong US economic data.
It was an unexpectedly volatile session that had a bit of everything for everyone, but it was the strong U.S. durable goods data that set the tone for the greenback which enjoyed unusually robust demand. Certainly, the greenback is not out of the woods just yet but the dollar bulls are seeing some light at the end of the tunnel, and with some significant data around the corner, it might be too early to throw in the towel just yet.
Also, the US dollar was supported by the news that Republicans a statement saying they’re scrapping the border tax proposal.
While the overnight dollar move is more likely about positioning rather than a bullish USD revival, a solid GDP print tonight followed up with a robust NFP next Friday should reinforce the Feds' telegraphed view that the September balance sheet run off is on as is a rate hike in December.
Euro
The market is obviously long EUR and after the strong US durable good print dealers are left mulling over saturated EURO position knowing there’s a lot of important data to deal with between now and December. After all had been said and done, EUR/USD had retraced all its post-Federal Open Market Committee statement gains.
Australian Dollar
The markets decided that the Fed rate path is entirely CPI-dependent and with four consecutive misses on the book and a five just as likely, the Carry trade roared back life. But what the market giveth the market taketh away. The surging US durable good orders has the street now looking for a robust US Q2 GDP, and this pivot has sent an overbought Aussie dollar tumbling overnight.