Dollar Drops On ADP Miss & Dovish Fed Comments
Dovish Comments
The US Dollar has come under pressure today on the back of dovish comments from Fed’s Williams last night. The New York Fed president said that he felt there was less pressure on the Fed to hike rates again near-term due to evidence of inflation continuing to fall. Williams attributes this to decline to the fading impact of tariffs and said that there was little evidence that higher energy prices had spilled over into other services, helping keep inflation under control.
Shifting Fed Expectations
Williams comments stand in contrast to those made by Fed chair Warsh last week who signalled that further tightening was to be expected as inflation was still a threat. Clearly there is still some uncertainty among policymakers, putting even greater focus on tomorrow’s jobs numbers. Following Williams’ comments yesterday, pricing for a September hike has slipped back to the 60% level from around 70% earlier in the week. If tomorrow’s numbers come in on the soft sides, this pricing should fall back to around the 50% level or less, taking USD down deeper. However, if we see an upside surprise tomorrow, we should see pricing jump back above 70%, helping USD push higher again. Yesterday’s ADP data has further added to uncertainty ahead of the headline data with private employment seen falling to 38k jobs from 46k prior, below the 47k the market was looking for.
Technical Views
DXY
The index is turning sharply lower today with price now testing support at the 99.15 level again. With momentum studies turning bearish, risks of a deeper push are seen with 97,97 the next support to note if we do break lower here. Topside, bulls need to break back above the 100 level to alleviate near-term bear risks.
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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.