FX Rates could be Quiet until PMIs and Jackson Hole Later this Week
Joe Perry August 19, 2019 11:19 AM
For all the negativity in the markets last week, such as possible recessions, inverted yield curves, worsening of trade wars, protests in Hong Kong, and the results of the primary elections in Argentina, major USD fx pairs have been in relatively tight ranges. Below are the ranges of some of some major currency pairs for last week:
These tight ranges were despite Fixed Income screaming higher, and stocks and gold moving lower.
This week begins in similar fashion for USD pairs, with minimal movement in the aforementioned pairs. So what is it going to take to get volatility back into these pairs?
We may have to wait until later in the week to find out. On Thursday, PMIs are due out, and on Friday, Fed Chair Powell is due to speak at the Jackson Hole symposium. These events could spark volatility in the USD major FX pairs.
PMI stands for Purchasing Managers Index. A reading above 50 is considered to show economic expansion, and a reading below 50 is considered to show economic contraction. The expectation for Germany is 43.0. This is already is low expectation, and any actual reading worse than this could send the Euro aggressively lower. Expectations for the Eurozone as a whole is 46.3 (although the German number is more closely watched), and expectation for the US is 50.5.
Chairman Powell is speaking at 10:00am EST on Friday at the Jackson Hole symposium. Although we’ll get a glimpse into the Fed’s thinking on Wednesday when the FOMC meeting minutes are released, the minutes are backward looking. Therefore, it will be more important what Powell has to say on Friday regarding the Fed’s current outlook. There are many answers the market will be looking for out of Powell on Friday: Is the Fed worried about an inverted yield curve? How worried is the Fed regarding the US-China trade war? How concerned is the Fed about a global manufacturing slowdown? If Powell’s comments are more dovish, the US dollar may move lower.
Regardless of the direction of the currency pairs, we may have to wait until Thursday and Friday to see the volatility.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.