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The end of the week heats up with data releases while the focus on monetary policy turns to Europe with the ECB minutes due.
US dollar barometer
July’s Federal Open Market Committee (FOMC) meeting minutes had been the key driver for price action overnight, weighing upon the US dollar alongside political woes in the US. The US dollar index was seen slumping more than 4 big figures, down to 95.50 levels into Thursday morning in Asia. After the lift from Fed Dudley’s comments and retail sales surprises, the split view within the Fed FOMC had been a dampener to the USD recovery. Concerns of persistently soft inflation remains rife despite Federal Reserve chair Janet Yellen sticking largely to the view that ‘temporary factors’ had been accountable for the lack of inflation growth in her semi-annual testimony to congress prior to July’s Fed meeting.
Following the weaker than expected July CPI numbers, the Fed may have little ammunition at hand to convince the market of a December hike and their stance – whether to shrug off the weak inflation numbers and continue on gradual approach towards interest rates lift-off – in the upcoming Jackson Hole symposium next week will be highly scrutinized by the market, expected to be next big Fed event for markets.
That said, from a technical perspective, we have certainly seen the US dollar index holding above last week’s lows after the higher-high printed earlier this week and a convincing close above the 94.00 figure would be needed to take some pressure off the downside.