TVC:DXY   U.S. Dollar Currency Index
1. IMO             Dudley tipped to the dovish side, especially on key inflation highlighting that it is " rising again, but still low". Other rhetoric reaffirmed much of what has been said post the brexit vote e.g. Uncertainty being the biggest factor.

2. Meanwhile, Williams was notably more upbeat/ optimistic, shrugging off the US's shock miss NFP report to instead point out that the underlying trend remains upward. He also relatively underplayed Brexit by saying his baseline view is that it will have a "modest impact" vs Dudleys sitting on the fence of "too soon to say". Further, Williams went on to underplay Brexit as a "normal global economic uncertainty".

3. Nonetheless, both found common ground regarding the "Uncertainty" surrounding the Brexit US spillover effects and "data dependency" being key for FOMC decisions. This has been the case not only between the two today but also for several members in the past few weeks/ months.

4. USD now looks to FOMC Minutes from the June Meeting for any further hints of net member direction and NFP on Friday. I expect much of the same, with bias to Dudley's more cautious/ dovish approach likely to underlie the Minutes but hopefully an outstanding NFP report to spur the USD.

5. The 30-day Federal Funds Rate futures market sold-off Fridays Hawkish gains today, with the Implied Probability of a 25bps FOMC rate hike significantly flattened across the curve, with a Sept/ Nov Hike now at 0% vs 5.9%, Dec at 13.7% vs 22.3% and Feb 2017 at 13.4% vs 21.8%. We also saw a dovish skew across the tenors in favour of a 25bps cut, with Sept/Nov probabilities increasing to 2.4% vs 2.2% Sept and 4.4% vs 2.2% Nov. July expectations traded flat at 97.6% no change.

6. Nonetheless, it was William's bias that won the day as DXY             Traded well offered, up 66pips at 96.21, much of which driven by the risk-off turn markets have taken, sending USD higher across the board, most notably against the antipodeans (RBA driven), CAD ( oil             4% lower) and GBP (down 2%) as BOE Gov             Carney continued to provide dovish sentiment. Also imo             earnings season $ demand may have started to price the index higher.

7. Going forward I expect to see continued USD strength across the board as GBP, the Antipodeans, CAD and JPY are likely to realise weakness on the back of poor economic fundamentals, brexit, and further oil             falling (global growth worries - brexit/ china linked). Also I expect BOJ easing to price UJ higher in the near future which, all in all, should provide the perfect environment for a higher DXY             and USD especially against JPY, NZD and GBP over the next 4-6wks for the attached reasons. End of week DXY             should close up 3%+ if NFP comes in firm/ strong - 98.5 target

Dudley on US Economy:

- Dudley: Brexit Main Uncertainty, Too Soon to Say Impact Yet

- Dudley: Investment in U.S. Also an Uncertainty

- Dudley: Inflation Is Rising Again, But Still Low

- Dudley: Fed Policy Remains Data Dependent

- Dudley: Uncertain Outlook Means Can't Predict Fed's Next Move

Williams on Brexit:

- "I think the economic effects, on the baseline scenario, are relatively modest, but there still is the uncertainty about how things are actually going to play out,"

- "I would say that what's happened with Brexit has been just one of the normal uncertainties that always occur in the global economy and things that we just have to take into account,"

- On the poor US Jobs Report - "the underlying trend continues to be good, continues to be above trend and continues to show that the economy is strengthening and not weakening,"
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