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Abstract:Forex traders could experience significant US Dollar volatility over the next week with the release of the July FOMC minutes Wednesday and Jackson Hole Economic Symposium slated to kick off Thursday.
US DOLLAR RATE TURNS TO JULY FOMC MINUTES & JACKSON HOLE
US Dollar currency traders will likely parse the July FOMC minutes on Wednesday for insight on the central banks monetary policy outlook and the latest Fed rate cut
USD price action could be largely overshadowed by the Jackson Hole Economic Symposium later in the week
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US Dollar price action has boasted considerable strength throughout 2019 with the greenback rocketing to multi-year highs even in spite of the July Fed meeting interest rate cut. Looking for the next major catalyst, USD currency traders will likely peruse the July FOMC minutes for details on the central banks decision to cut rates for the first time in over a decade while markets await the highly-anticipated start of the Jackson Hole Economic Symposium.
DXY INDEX – US DOLLAR PRICE CHART: DAILY TIME FRAME (DECEMBER 07, 2018 TO AUGUST 20, 2019)
Chart created by @RichDvorakFX with TradingView
Although, the July FOMC minutes could fail to grab the attention of traders considering the text is backward-looking. The July FOMC minutes are potentially stale seeing that significant market developments have unfolded since the Federal Reserve deliberated US monetary policy last – like Trumps tariff whiplash and 2s10s yield curve inversion. Nevertheless, the July FOMC minutes could still send the US Dollar swinging if the details found within warrant a reaction.
FEDERAL RESERVE INTEREST RATE RANGE PROBABILITIES – SEPTEMBER 2019
In his follow-up press conference accompanying the July rate cut, Fed Chair Powell labeled the central bank‘s decision to lower its policy interest rate as a “mid-cycle adjustment” which suggests accommodation will be short-lived. As such, information revealed in the July FOMC minutes that underscores – or contradicts – Powell’s description could weigh on expectations for future rate cuts. Looking to the next FOMC meeting in September, markets are pricing an 82.6% chance that the Fed cuts rates by 25-basis points and a 17.4% probability of a 50-basis point cut. Beyond the September Fed meeting, which will provide markets with updated economic projections, rate traders are currently expecting roughly 75 basis points of cuts to the Federal Funds Rate before year-end.
That said, US Dollar price action in response to the July FOMC minutes is expected to be strong-armed later in the week by headlines coming out of Jackson Hole. Fed Chair Powell and other US central bankers will likely take the opportunity to lay the groundwork for monetary policy decisions in the months ahead. Consequently, US Dollar currency pairs could exhibit higher than expected volatility as markets remain juxtaposed between US-China Trade War uncertainty and relatively solid US economic data (such as the latest retail sales and NFP numbers) which might keep the Fed sidelined from further easing.
US DOLLAR IMPLIED VOLATILITY & TRADING RANGES
On the surface, US Dollar 1-week implied volatility readings seem quite low considering several measures are less than 12-month averages. Judging by options-implied volatility, expected US Dollar price action over the next week appears to be underpriced considering the daunting event risk posed by Jackson Hole which has historically sparked sizable market reactions. Moreover, US durable goods orders and consumer confidence data slated for release next Monday and Tuesday respectively both stand to spur US Dollar volatility – particularly if the actual readings on the closely watched economic indicators catch markets off-guard.
FOREX TRADING RESOURCES
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Disclaimer:
The views in this article only represent the author's personal views, and do not constitute investment advice on this platform. This platform does not guarantee the accuracy, completeness and timeliness of the information in the article, and will not be liable for any loss caused by the use of or reliance on the information in the article.
The Japanese Yen rose 0.7% against the US Dollar after BoJ Governor Kazuo Ueda hinted at potential rate hikes. This coincided with a recovery in Asian markets, aided by stronger Chinese stocks. With the July FOMC minutes already pointing to a September rate cut, the US Dollar might edge higher into the weekend.
As several nations focus on enhancing their currencies, the dominance of the US dollar in the global monetary system is declining. Nouriel Roubini, also known as “Doctor Doom” for accurately forecasting the 2008 global financial crisis, recently warned that the dollar’s position as the primary reserve currency in the world is at risk. This warning is proving accurate, as the world’s major emerging economies have agreed to ditch USD for trade!
As several nations focus on enhancing their currencies, the dominance of the US dollar in the global monetary system is declining. Nouriel Roubini, also known as “Doctor Doom” for accurately forecasting the 2008 global financial crisis, recently warned that the dollar’s position as the primary reserve currency in the world is at risk. This warning is proving accurate, as the world's major emerging economies have agreed to ditch US dollar for trade!
The week ahead: US Dollar struggles to find demand