US FX WRAP: Dollar lacks direction ahead of a pivotal week

Analysis details (20:40)

The Dollar Index was flat, trading within an extremely tight range, and largely unreactive to the mixed US PCE data for June, whereby Core M/M and Y/Y came in marginally above expectations, while the headline price index came in line. Elsewhere, Atlanta Fed's Initial GDPNow for Q3 was 2.8%. The Greenback finished the week flat, in what was a muted week, in terms of ranges, as perhaps participants await the deluge of risk events next week. The Fed's interest rate decision is one, and we will be looking to see how they frame the recent cooling economic data and see if they open the door to a widely expected cut in September, although Powell will likely stress data dependence. At the moment, Fed Pricing sees a 95.5% chance they hold next week. The docket for the upcoming week will also see ISM Manufacturing PMI and NFP out of the US, as well as mega-cap earnings.

The Euro is slightly firmer vs. the Buck, with the cross hovering near 1.0860. Newsflow in the session was thin, though, Friday did see the ECB'S SCE 12-month and 3-year projections unchanged at prior levels. Meanwhile, ECB Schnabel's remarks largely aligned with the Central Bank's narrative, specifically, the speed of ECB rate cuts will depend on data. Although, she stressed services inflation is showing that the last mile of the inflation fight is especially difficult, and that a first rate cut does not automatically lead to a series. Lastly, news for the day saw France and Italy report positive consumer Confidence reports, while Spanish Unemployment fell more than expected. 

Activity Currencies were mixed vs. the Greenback, with Antipodeans trying to claw back recent losses, succeeding more so earlier in the session, with gains eventually trimming. USD/CAD was flat, trading inside a tight range on Friday, with eyes on the Sterling ahead of the BoE's rate decision (Thu), where BoE pricing puts an approx. 50/50 chance of a rate cut or hold. Cable finished the session around highs of 1.2875, nevertheless, the pair finished the week in the red for the second consecutive week.

Haven FX diverged once again, with the Franc reversing some of the outperformance it experienced on Thursday, while the Yen conversely slightly strengthened; even though cooler Tokyo CPI put pressure on the cross. US Core PCE had no sustained impact on the crosses. Bloomberg reported that Japan's Ministry of Finance stated he wants the BoJ to cut bond purchases gradually, a view which corresponds to the BoJ source's reports earlier in the week that the BoJ is to have a detailed plan in the upcoming meeting on having bond buying in the coming years. Havens continue their weekly streak of gains, with the USD/JPY dropping below its 200WMA (155.21) to 153.74, its third consecutive week of losses; meanwhile, the Swissy incurs a fourth week of gains.

In Scandi FX, Swedish Unemployment Rate SA (Jun) was unchanged, while the Viking cross favoured the NOK on Friday, ticking slightly higher, ahead of Swedish GDP and Retail Sales (Mon).

EMFX: COP and CLP weakened against the Dollar, with the former weighed on by depleted copper prices. On central bank decisions, the CBR raised their Key Rate, as expected, to 18% (prev. 16%), and they added they will consider hikes at upcoming meetings.

26 Jul 2024 - 20:40- Research Sheet- Source: Newsquawk