Dollar risks skew downward

While August is typically a quieter month for FX, Middle East hostilities and market interventions to support the yen have done plenty to keep traders engaged, so far, at least. Combined, these dynamics sent the dollar on the round trip over the past week, before payrolls finally sank the DXY on Friday. NFPs aside, however, data catalysts and central banks have otherwise been overshadowed. The week ahead is likely to offer similar themes.

Looking ahead, US-Iran negotiations continue to generate more headlines than concrete progress. Meanwhile, a USDJPY rally off the lows has us wondering when again Japanese authorities might choose to intervene. Decisions from the RBA and Norges Bank top the docket of central bank events, but we suspect, with limited FX impact. That leaves July’s US CPI release as the only major catalyst likely to move currency markets. And, if the lessons of the week just gone hold, that leaves dollar risks skewed asymmetrically downward.

You can read the Week Ahead in full here:

Authors:

Nick Rees, Head of Macro Research

Barry van der Laan, Senior FX Market Strategist

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