The greenback, in terms of the US Dollar Index (DXY), gives away some of its recent gains and recedes to the 93.00 zone on Friday. The index managed to reverse four consecutive daily pullbacks and closed with decent gains above 93.00 the figure on Thursday, mainly sustained by positive Fedspeak and following better-than-expected results from another revision of the US GDP during the April-June period.
Indeed, St. Louis Fed J.Bullard (dovish, 2022 voter) reiterated he expects to end tapering by end of Q1 2022. He also expressed concerns over an “incipient housing bubble”. In addition, KC Fed E.George (hawkish, 2022 voter) and Atlanta Fed R.Kaplan (hawkish, 2023 voter) said the Fed should start paring the bond-purchase programme sooner rather than later (October?).
Collaborating with the upside in the dollar, yields of the key US 10-year note climbed to new highs around the 1.38% level. In the US data space, inflation figures tracked by the PCE will take centre stage seconded by Personal Income/Spending, Trade Balance results and the final Consumer Sentiment gauge for the current month. Investors, in the meantime, will closely follow the speech by Chief J.Powell at the Jackson Hole Symposium on “The Economic Outlook”, always with the QE tapering in the centre of the debate.
What to look for around USD
The dollar’s corrective move seems to have met solid contention in the 92.80 region so far. The weekly pullback in DXY comes in tandem with the improvement in the risk complex, all amidst rising speculation surrounding the QE tapering ahead of the key speech by Chief Powell at the Jackson Hole event. Support for the buck, in the meantime, comes in the for of coronavirus concerns, high inflation and higher real yields.
Key events in the US this week: Jackson Hole Symposium, PCE, Personal Income/Spending, Advanced Goods Trade Balance, Final Consumer Sentiment (Friday).
Eminent issues on the back boiler: Biden’s multi-billion plan to support infrastructure and families. US-China trade conflict under the Biden’s administration. Tapering speculation vs. economic recovery. US real interest rates vs. Europe. Debt ceiling debate. Potential hint at the timing of QE tapering at the Jackson Hole Symposium. Geopolitical risks stemming from Afghanistan.
US Dollar index relevant levels
Now, the index is losing 0.06% at 92.98 and faces the next down barrier at 92.80 (weekly low Aug.24) followed by 92.47 (low Aug.13) and finally 91.78 (monthly low Jul.30). On the flip side, a break above 93.72 (2021 high Aug.20) would open the door to 94.00 (round level) and then 94.30 (monthly high Nov.4 2020).