Buck stuck as is most FX ahead of inflation tomorrow
The U.S. dollar is trading in muted ranges, with few data points to move the needle as market focus remains on geopolitical developments and “chipflation.”
Indeed, it is one of those days where it looks like nothing has changed for the buck, as there is not much in the way of hard data to crunch amid a mid-August FX lull following earnings season and a July defined by central bank decision-making. Meanwhile, analysts are becoming concerned about stubborn price growth in technology, with microchips seeing increasing demand and commanding higher price points as a result. This detail will matter in tomorrow’s release of Consumer Price Index figures as traders and investors decipher how much more consumers are paying for electronics.
As far as diplomatic efforts in the Middle East go, commentary from Pakistan’s Defense Minister suggested that the U.S. and Iran are “close to some sort of agreement.” While we have heard this before, it is a positive note that Pakistani leadership, which has been heavily involved in managing talks, feels some optimism. We shall see if futures and stocks respond with some risk appetite. S&P 500 firms are on track to deliver 32.0% year-on-year profit growth in Q2. This follows a 30.0% climb in Q1. Such runs are rare and have occurred only ten times since 1936. Perhaps there is history left to be made, but for now, USD remains tight.
What to Watch This Week…
- Euro-zone GDP, Friday
- US CPI on Wednesday, 8:30 AM
- USA Online is always open
The complete Economic Calendar can be found here.
JPY
The Japanese yen is losing ground and has been dwindling over the past eight days, dropping 1.3% of its value after what seemed like successful intervention to appreciate it. Although the end of July brought tremendous relief to yen bulls, who interpreted the round of operations in coordination with U.S. Treasury Secretary Scott Bessent as a major catalyst for a stronger yen, there is now growing doubt that the U.S. has the will to pour more resources into aiding Japanese financial authorities. Markets seem to believe that the U.S. Treasury is trying to limit its exposure and are punishing the yen once again, shorting it and limiting its improvement against the dollar to just 4.2% from the time the intervention became evident. As mentioned in previous writing regarding help from the U.S. Treasury to many investors it simply looked like an exercise in “quantitative easing.”