Dollar rallies against major peers on stronger data

Wednesday, August 20, 2014

The dollar index surged to an 11 month high yesterday as solid economic data released yesterday increased the speculation among market participants that the Fed would look to raise interest rates soon. The dollar gauge measured against a basket of major peers managed to breakout of the range that had dominated trading activity throughout the first half of August, rallying to a close of 81.883. Activity early on this morning has seen gains extended, testing levels towards 82.0 for the first time since mid-September last year.

Investors will be anticipating the release of July’s FOMC meeting minutes, due out after European markets close, for further details regarding the Fed’s policy stance as well as comments from the Jackson Hole meeting of central bankers starting tomorrow. Highlighted concerns among many market participants will be the Fed’s view on current labour market conditions, with many holding the view that there is still considerable slack in labour resources which could provide policymakers with the necessary justification for continued easing of monetary policy. Despite the unemployment rate falling at a faster rate than previously forecasted, Yellen may highlight the fact that the rising level of part time employees and stagnant wages are cause enough for postponing a rates rise.

Asian markets faltered overnight, putting an end to the rally that had dominated both the European and US sessions. Chinese stocks pared recent gains, with the Shanghai Composite snapping a three day bull run ahead of the release of tomorrow’s manufacturing PMI reading. The weakness has carried over to the European session with most major benchmark indices opening on the back foot while the pound remains underpinned around yesterday’s close. With the release of BoE minutes today investors will look for any indication of shifting sentiment among policy makers. 

DXY breaks out of sideways trading on the upside

DXY Curncy DOLLAR INDEX SPOT 2014 08 20 08 05 15

Shanghai Composite pares recent gains ahead of manufacturing PMI

SHCOMP Index Shanghai Stock Exc 2014 08 20 08 16 48

Events for today

0930

UK

Jul

BOE minutes

1530

US

w/e

EIA Energy Stocks

LT:

Sep  Crude WTI (NYMEX) 

All times UK Local Time

 

Topics: US Fed, DXY, GBP
More from: Kash Kamal