Dollar jumps broadly today as markets continue to re-adjust their expectations on a Fed July cut. After last week’s string of data, in particular solid NFP, 50bps cut is basically priced out. But many, like us, are very skeptical on the need for delivering the insurance cut now. To us, US-China trade war just “halted” escalations. Thing could turn bad again any time and it’s better for Fed to save that bullet for now.
Fed chair Jerome Powell will deliver opening remarks on the topic of “stress testing” at the Federal Reserve Board Conference today. It’s unsure if he will save the comments on monetary policy for tomorrow’s Congressional testimony. In any case, traders are already fastening their seat belts. Staying in the currency markets, Swiss Franc, Euro and Yen are the strongest ones. In particular, risk aversion is helping both Yen and Swiss Franc. Australian Dollar is the weakest so far, followed by Sterling.
Technically, AUD/USD’s break of 0.6956 minor support should have confirmed completion of rebound from 0.6831. Deeper decline should be seen to retest this low.
AUD/JPY’s decline today also put focus back to 75.13 minor support. Firm break will indicate completion of corrective rise from 73.94 and bring retest of this low too.
