Daily Market Update

Choppy, August Trading Ahead of Jackson Hole

August 22, 2017

This week’s moves early in the week are reminiscent of last week’s trading.  The dollar is experiencing short, sharp movements before retracing those losses or gains during the following session.

USD

This week’s moves early in the week are reminiscent of last week’s trading.  The dollar is experiencing short, sharp movements before retracing those losses or gains during the following session.  Yesterday, the U.S. dollar sold-off yesterday morning against the U.S. dollar on next-to-no news.  However, the greenback was able to recoup those losses overnight. The moral of the story for trading in August seems to be to take advantage or moves quickly as they will soon disappear.     

There were a number of non-currency related headlines that are worthy of note as they could affect the economy in general in the future.  Senate Majority Leader Mitch McConnell promised that there is “zero chance” that Congress will fail to raise the debt ceiling.  While the GOP holds both houses of Congress and the White House, the passage of a clean bill is far from a guarantee although we believe it will pass.  Later in the evening, President Trump addressed the nation about his strategy in Afghanistan. Initial reactions are that the plan is much like the strategies of his two predecessors and will extend the longest military conflict in the history of our nation. 

The Richmond Fed Manufacturing Index will cross the wires at 10 a.m. Eastern, but is likely to have only a muted effect on the buck.  Traders seem to have already shifted their focus to this weekend’s summit in Jackson Hole, WY.  Fed President Janet Yellen will speak Friday morning and markets are sure to react to her tone on inflation.  

 

EUR

The EUR shot higher yesterday on no news before retracing overnight, highlighting the jerky, low volume trading that is common in the month of August.  This morning’s German ZEW survey failed to meet expectations, adding additional weight on the common currency.   

Traders remain focused on European Central Bank President’s scheduled comments at the central bank symposium on Friday.  Draghi and others have tried to downplay expectations that Draghi will change the bank’s tack on Friday, but its will hard for him to sidestep questions on the health of the economy and the inflation outlook.    

 

GBP

The British pound remains lower than its monthly average against the U.S. dollar, and fell to its lowest level against Euro in seven years.  Running the risk of sounding like a broken record, “Brexit uncertainty” remains the story of the year.  With the next round of negotiations set to take place next week, both the British government and the European Union have begun posturing.  Until the terms of the “divorce” become clearer, the sterling will struggle to make any meaningful gains.  

 

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