G10 currencies have traded in mixed fashion on Monday, as global markets continue to ponder ongoing growth concerns and exercise caution ahead of Wednesday’s FOMC rate decision.
This sentiment is keeping the dollar off its highs as investors remain eager to see if the run of softer US data has in any way altered the Fed’s hawkish rate path. Additionally, market participants may have one eye on Thursday’s advance reading of second quarter GDP.
Overall, notorious safe havens have underperformed to start the week, with the Japanese Yen at the bottom of the G10 leaderboard. Conversely, AUD, GBP and CAD are the best performers, all rising the best part of 1% against the Yen and recovering the entirety of Friday’s retreat in the process.
An unchanged NZD is slightly contrary to broader moves, potentially explained by AUD/NZD creeping higher, in tandem with Australia/New Zealand 2-year swap rate gap.
The Euro was pulled in both directions as the initial IFO business sentiment survey indicated that business morale in Germany fell more than expected in July to its lowest in more than two years.
Initial weakness, however, was short-lived and EURUSD gradually reversed higher towards 1.0250, where a sizeable volume of option expiries for the NY cut kept price action muted around this level. After expiries, aided by a negative Gazprom headline relating to the NordStream 1 Gas pipeline, EURUSD fell roughly 40 pips to 1.0210, trading close to unchanged from Friday’s close.
An initial month-end model from Citi points to a net need to sell USD this month, with a signal strength in-line with the historical norm.
Some second tier US data highlights the docket on Tuesday in the form of consumer confidence and the Richmond manufacturing index. Focus remains firmly on Wednesday’s Federal Reserve decision and press conference.