09/08/2024
US dollar update
Summary
On August 9, 2024, the US Dollar Index (DXY) dropped below 103, reflecting a modest decline from its recent weekly high of 103.34. This movement is influenced by a combination of factors, including a drop in US Treasury yields and shifting expectations around the Federal Reserve’s monetary policy. Treasury yields (10-year) stood at 3.97%, contributing to the downward pressure on the USD.
Despite the decline, the US Dollar’s downside is somewhat mitigated by safe-haven flows amid escalating geopolitical tensions in the Middle East. The intensification of Israeli airstrikes on Gaza and the potential for broader regional conflict has increased demand for safe-haven currencies, offering some support to the USD.
Economic data has also played a significant role in shaping market sentiment. The US initial jobless claims dropped to 233,000 for the week ending August 2, below market expectations of 240,000, marking the largest drop in the last months. This data eased concerns of an economic downturn, with the market dialing back expectations for a 0.50% Fed rate cut in September, reducing the probability from 69% earlier in the week to 54.5%. Additionally, the continuing jobless claims data indicates a softer labor market, contributing to ongoing debates about the Fed’s future policy direction.
Overall, the US Dollar has maintained its position despite the mixed economic signals and geopolitical concerns, with market participants closely monitoring Fed communications and economic data for further direction.
Market Views & Opinions
Scotiabank in the most recent Daily FX Update provides its view on EURUSD:
“EURUSD short-term technicals: Neutral—Spot has drifted a bit on the session so far but movement is limited and confined within recent ranges. The EUR chart suggests spot remains well-supported on minor dips at the moment but the market is essentially consolidating after the sharp advance seen Friday and Monday. Support is 1.0895/00. Resistance is 1.0965/75.”
According to Reuters:
“Disappointing U.S. jobs data has shaken confidence in a soft landing for the world’s largest economy, sending global equity markets tumbling and bets on interest rate cuts surging. But investors abandoning a popular yen carry trade has played a big role in the selloff, complicating the message from asset prices on the economic outlook. The likelihood of a recession is anyone’s guess. Goldman Sachs has raised its odds of a U.S. recession to 25%. JPMorgan sees a 35% chance of one starting before year-end.”
IMPORTANT DISCLAIMER
The information in this report is of a general nature only. It is not a piece of personal financial advice. It does not take into account your objectives, financial situation, and personal needs.
a-Quant is not responsible for your actions and recommends you contact a licensed financial advisor before acting on any information contained in this general information report.
