Dollar extends post-Fed gains

Dovish Fed expectations dialed back

The US dollar continued its current rally in this morning’s Asian session as expectations for an extended easing cycle from the Fed were scaled back. Chairman Powell more-or-less poured old water on a series of cuts in the post-meeting press conference, saying that yesterday’s cut may not be the start of a long easing cycle. He later tried to adjust his comments that it might not be just the one cut.

Nevertheless, market pricing now has about a 60% chance of another cut at the September meeting and the US dollar is finding broad-based support with this shifting outlook. USD/JPY is positive for a second straight day, rising the most in a week to hit 109.32, the highest since May 31. The pair is aiming toward the 100-day moving average at 109.65, which hasn’t been touched since May 22.

 

USD/JPY Daily Chart

Source: OANDA fxTrade

 

Caixin PMI beats estimate

The Caixin manufacturing PMI for July improved to 49.9, beating forecasts of a 49.6 print and up from June’s 49.4 reading. Despite the improvement, the commentary accompanying the release noted that new export orders remained weak and factories are still cutting jobs.

AUD/USD gained a bit of traction after the data was released. The FX pair has gained 0.16% so far today and could be facing its first up-day in 10 days, if it can hold on to those gains. Against the yen the gains are more pronounced, with the pair rallying 0.49% to 74.82. AUD/USD is now at 0.6856 with the 55-day moving average at 0.6951 the first possible resistance point.

 

AUD/USD Daily Chart

Source: OANDA fxTrade

 

It’s the PMI fest

The start of a new month heralds the slew of July PMI data from both official sources and from Markit. Germany’s final reading by Markit is seen improving to 45.4 from 43.1 while the Euro-zone version is seen unchanged at 46.4. The UK’s PMI is expected to take a slight dip to 47.7 from 48.0 while the US readings are expected to be unrevised at 50.0. The US ISM manufacturing PMI is forecast to show a slight uptick to 52.0 from 51.7, though it may be interesting to note that the Chicago PMI reading for the same month collapsed to the lowest level since December 2015, according to yesterday’s data release.

 

Bank of England on tap

The Bank of England is one of the few central banks that has not been too vocal about easing rates and it’s highly likely that the Brexit uncertainty is forcing the Bank to sit on its hands. Read the excellent preview from my colleague in London below: