Dollar And Euro In Play

With the final week of August upon us, the days ahead look fraught with potential for further disarray for the dollar on the heels of the Jackson Hole symposium. The gathering of central bankers from across the globe was used as a speaking platform for Fed chair Janet Yellen and ECB President Mario Draghi.

The dollar saw a sharp selloff after Yellen offered no insight on monetary policy as far as the timing of the next interest rate hike or the unwinding of bank assets, which investors were keen to hear in the speech. USD/JPY saw a 53 pip decline in the hours after the speech in what will likely be the continuance of a multi-week downtrend for the pair.

Most of the key data for the week and month comes closer to the end of the week with inflation numbers, nonfarm payrolls, and ISM. Strength here could be a saving grace for the dollar, although August is known to be the weakest month for growth in the U.S., statistically.

In the wake of Draghi’s speech, EUR/USD turned higher to break the 1.19 handle, signaling the continuance of the single currency’s meteoric rise for the year. Although the ECB president stated that “the global recovery is firming up”, which sent the euro higher, he tempered this with another statement saying there is still significant need for stimulus.

Given the surge in euro buying volume, it is likely that investors will ignore the latter remark since its common knowledge that the bank’s monetary leaders are typically very dovish and need the currency to weaken in order to stimulate the economy. 1.195 is the next major handle for the EUR/USD pair, likely to be seen in coming weeks, assuming no unexpected derailment occurs for the Eurozone. The only key pieces of data this week are CPI and Unemployment, which are scheduled Thursday, and Manufacturing PMI scheduled on Friday.

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