Dollar Breaks Down
The US Dollar is breaking down heavily today as markets reacted to reports that Trump is considering announcing his pick to replace Fed chair Powell ahead of time over his frustration with the Fed’s reluctance to ease rates sooner. Indeed, with Powell continuing to strike a more neutral/hawkish tone on rates, despite recent dovish commentary from Fed members like Bowman and Waller, there is an increasing sense of unease around the Fed’s stance on rates currently. This backdrop, coupled with the unwinding risk premium linked to the ongoing ceasefire between Israel and Iran means that USD looks poised to fall further for now.
US Data On Watch Today
Today, focus will be on the final release of Q1 GDP data, as well as May’s durable goods orders and the weekly initial jobless claims. Given the current environment, labour market remain holds the potential to drive price meaningful, especially after the May inflation figures failed to prompt a dovish shift from Powell. The view on this is that some development in the second part of the Fed’s mandate (jobs) might see more members lean towards a more dovish stance, even with lingering inflation concerns. The market is currently pricing in a roughly 25% chance of a rate cut by July 30, and a more than 80% chance of a cut by September. Beyond that there’s a roughly 50% chance of a further cut ahead of year end. Any further data weakness is likely to see drive a dovish shift in pricing, putting further pressure on USD near-term.
Technical Views
DXY
The sell off in DXY has seen the market breaking down below the 98 level to fresh YTD lows. Price is now testing the broken 2021 highs around 96.89 which, if broken, will put focus on a continuation lower to deeper support, in line with bearish momentum studies readings.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.