Dollar Drops as Oil Prices Slip
The U.S. Dollar is modestly lower as oil prices and U.S. Treasury yields slip. Both Brent and WTI fell more than 2.5% this morning as the secondary sanctions described by U.S. Treasury Secretary Scott Bessent yesterday fell short of expectations.
Additionally, Pakistan’s Army Chief Field Marshal Asim Munir and Interior Minister Mohsin Naqvi met with Iranian President Masoud Pezeshkian and Foreign Minister Abbas Araghchi for discussions that centered around preventing further escalation with the United States and reopening the Strait of Hormuz. 10-year Treasury yields fell by 3 basis points as inflation expectations fell on the back of declining oil prices.
The annual Jackson Hole Economic Policy Symposium is set to begin on Thursday and Traders are awaiting Federal Reserve Chair Kevin Warsh’s speech on Friday to see whether he will provide some clarity on monetary policy. Warsh has largely abandoned the kind of forward guidance that Traders have become accustomed to with the last several Fed chairs, but he has faced criticism for not clearly communicating details of the Fed’s so-called reaction function.
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EUR
The Euro remains well-supported near recent highs this morning after economic data out of Germany, the Eurozone’s largest economy, showed that economic output grew faster than expected in the second quarter. Additionally, all three indexes (business climate, current assessment, and expectations) in the German ifo Institute’s August survey exceeded even the high-end of expectations despite headwinds such as higher energy costs and political uncertainty.
AUD
The Australian Dollar is modestly stronger versus the Greenback this morning after the Reserve Bank of Australia released the minutes of its August policy meeting, which showed that the board actively debated hiking interest rates before electing to hold. The hawkish hold leaves room for further tightening in the future should more persistent inflation risks materialize.