US Dollar Selling, Impact of Fed Powell’s speech hits home

Exclusive Capital Research Team

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Market Brief, Tuesday, 1st of September, 2020

The Federal Reserve’s decision to shift its inflation focus last week is catching up to the US dollar. Federal Reserve Chair Jerome Powell outlined an accommodative policy change which is believed could result in inflation moving slightly higher and interest rates staying lower for longer.

Focus for the dollar this week will be the outcome of the Purchasing Managers Index, Payrolls data with the penultimate Non-Farm Job report published on Friday. No significant deviation from July’s data is expected except in the quality of NEW jobs created reflected by the average hourly earnings, expected to be down by 0.2%

On Thursday China will look to improve on Monday’s manufacturing and non-manufacturing PMI with the Caixin Manufacturing PMI. Although considered low impact news any better than expected data from the world’s largest economy, that is correlated to inflation and growth would be more than welcome during these times of uncertainty with immediate impact on the ‘Aussie’ and WTI crude oil prices.

The Euro is currently carrying the biggest punch amongst the ‘Majors’, closing 0.24% higher than the dollar. Except for fears of a second wave pandemic, the Euro will look to extend its bullish run on upcoming risk events and poor economic performances from its counterparts.

Yesterday sterling hit another YTD high against the dollar but began cooling off at 1.34. The cable continued to disrespect Brexit concerns and potential negative changes to monetary policy. A reality check could be just around the corner if Brexit disputes continue and BoE Governor Bailey’s speech negatively impacts trader’s sentiment on Thursday.

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