Dollar Steady, Loonie Wobbles, What Will Powell Say This Friday?
The US dollar moved nearly flat on Tuesday, with the Bloomberg Dollar Spot Index rising less than 0.1% amid thin trading volume. Market focus shifted to Fed Chair Jerome Powell's speech at the Jackson Hole symposium later this week, which is expected to provide a clearer signal regarding the direction of interest rate policy. Currently, the swap market is pricing in nearly an 80% chance of a 25 bps cut in September, while the 2-year US Treasury yield is down about 2 bps to 3.74%.
Meanwhile, the Canadian dollar (loonie) weakened 0.4% to 1.3860 against the US dollar after Canada's July inflation data came in weaker than expected. The headline CPI rose only 1.7% year-on-year (vs. 1.8%), fueling expectations of a Bank of Canada rate cut in December. Markets are now pricing in about a 24 bps cut, up from 19 bps the day before. The loonie also broke below its 100-day moving average and has the potential to test its August 1 low of 1.3879.
In other major currency markets, EUR/USD rose 0.1% to 1.1669, USD/JPY fell 0.1% to 147.74, and USD/CHF weakened 0.2% to 0.8061. FX market volatility remains low due to summer seasonal factors and a wait-and-see attitude ahead of Jackson Hole. The US employment report on September 5 is expected to be the next trigger for volatility.
In addition to macroeconomic factors, the market is also closely monitoring geopolitical developments. The US and Europe are reportedly preparing security guarantees for Ukraine to pave the way for a historic meeting between Presidents Putin and Zelenskiy. However, high uncertainty continues to limit market movements. (ayu)
Source: Newsmaker.id
