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Greenback Ends On Firmer Footing As Equities Plummet

FOREX
  • Lower-than-expected data for US PCE and Core PCE weighed on the greenback ahead of Chair Powell’s address on Friday with a notable kneejerk to the downside as the data was released.
  • This dollar weakness was exacerbated by a strong pop higher for the Euro following source headlines suggested some ECB policymakers want to discuss a 75 basis point interest rate hike at the September policy meeting, prompting EURUSD to rally to the best levels of the week above 1.0050.
  • Powell’s mention of a restrictive policy ‘for some time’ prompted a kneejerk spike higher for the greenback but the reiteration of data dependency saw the initial move reverse course very swiftly as market participants analysed Friday’s data points.
  • Given the earlier moves in the Euro, USDJPY was a good barometer for USD sentiment and an indication of the whippy price action. Opening at 136.70, the pair briefly rallied to 137.30 before sharply plummeting to fresh lows of the day at 136.23. However, with US yields holding at higher levels and subsequent pressure on major equity benchmarks throughout the rest of the US session, the greenback steadily advanced approaching the close.
  • The pressure on stocks has seen significant weakness for the likes of NZD (-1.54%) and AUD (-1.29%) and despite more modest daily adjustments, the broad greenback strength saw strong reversals for most other G10 currencies.
  • The USD Index has firmed around half a percent on the week and looks set to post the highest weekly close for six weeks.
  • Aussie Retail Sales data on Monday is the only notable release on the Calendar. Monday sees the UK out for the bank holiday. The focus will quickly turn to Eurozone inflation data on Wednesday before Friday’s August Employment report from the US.
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