Jerome Powell Weakened Position of the USD (Weekly Review)

At the G20 summit, US and PRC leaders Donald Trump and Xi Jinping agreed to resume negotiations on contentious trade issues, which revived hope for the end of the trade war between these countries. Along with it, investors once again awakened their appetite for risk, and last week the stock indexes updated their highs. However, despite their growth, the USD could not continue to strengthen against the Japanese yen. Moreover, it, being under pressure again, declined to support 107.80, which indicates the continuing risks of resumption of the fall.

Political risks in the UK and the threat of a country’s exit from the European Union without a deal contributed to maintaining pressure on the British pound from a number of its competitors, including the euro and the dollar. Having updated the weekly minimum, the GBP still managed to win back some of the losses, but under the conditions of the above risks, there is still no need to talk about improving its prospects, and its decline may resume.

The recovery of both the GBP and EUR against the USD last week was facilitated by the comments of US Federal Reserve Head Jerome Powell, who, as predicted by participants in financial markets, raised expectations for lowering interest rates at the next FOMC meeting. Despite the USD weakness, the USD bears should still be extremely cautious, since the differential in interest rates at this stage does not justify its large-scale sales for the euro, the Swiss franc and the Japanese yen.

Schedule for this week:

Monday, July 15
12:30 GMT - USA. NY Empire State Manufacturing Index;
12:50 GMT - USA. FOMC Member Williams Speaks.

Tuesday, July 16
22:45 GMT – New Zealand. Consumer Price Index (CPI);
01:30 GMT - Australia. Reserve Bank of Australia Meeting Minutes;
08:30 GMT – United Kingdom. Claimant Count Change;
08:30 GMT - United Kingdom. Average Earnings;
08:30 GMT - United Kingdom. ILO Unemployment Rate;
09:00 GMT - Germany. ZEW Economic Sentiment;
09:00 GMT - Eurozone. ZEW Economic Sentiment;
12:15 GMT - USA. FOMC Member Bostic Speaks;
12:30 GMT - USA. Retail Control (Jun);
12:30 GMT - USA. Retail Sales Ex Gas/Autos;
12:15 GMT - USA. Industrial Production;
17:00 GMT - USA. Fed Chair Powell Speaks.

Wednesday, July 17
00:30 GMT - Australia. Westpac Leading Index;
08:30 GMT – United Kingdom. Consumer Price Index (CPI);
08:30 GMT - United Kingdom. Core Consumer Price Index (CPI);
08:30 GMT – United Kingdom. Producer Price Index (PPI);
09:00 GMT - Eurozone. Consumer Price Index (CPI);
09:00 GMT - Eurozone. Core Consumer Price Index (CPI);
12:30 GMT – Canada. Core Consumer Price Index (CPI);
12:30 GMT - Canada. Consumer Price Index (CPI);
12:30 GMT - USA. Building Permits;
12:30 GMT - USA. Housing Starts;
18:00 GMT - USA. Beige Book.

Thursday, July 18
23:50 GMT - Japan. Trade Balance;
23:50 GMT - Japan. Import/Export;
01:30 GMT - Australia. Unemployment Rate;
01:30 GMT - Australia. Employment Rate;
08:30 GMT - United Kingdom. Retail Sales;
12:30 GMT - USA. Initial Jobless Claims;
12:30 GMT - USA. Philadelphia Fed Manufacturing Index.

Friday, July 19
23:30 GMT - Japan. National Consumer Price Index (CPI);
23:30 GMT - Japan. Foreign Investments in Japanese Stocks;
23:30 GMT - Japan. Foreign Bonds Buying;
06:00 GMT - Germany. Producer Price Index (PPI);
12:30 GMT - Canada. Retail Sales;
14:00 GMT - USA. Michigan Consumer Sentiment.

Author: Anthony Porter, IAFT Analyst