Market Drivers July 23, 2018
Dollar finds a bid
BOJ caps JGB yields
Nikkei -1.33% Dax -0.35%
Europe and Asia:
USD Existing Homes 10:00
The dollar was marginally weaker in quiet listless start of week trade with USDJPY dipping below the 111.00 level in Asian session dealing before finding a modicum of support.
The anti-dollar flow were fanned by yet another Trump Twitter Tantrum this time pertaining to Iran as the President went on all caps tirade warning Iran not to threaten US. After a small flurry of activity prices essentially settled down to their current levels with little economic or political action to drive trade.
The G-20 communique was bland, reaffirming the bloc’s commitment to floating exchange rates and noting that current trade tensions posed a downside risk to global growth, but whatever tensions between US and rest of the bloc were smoothed over in the final statement and markets had no reactions to the release.
With no data on the docket until US existing home sales later in North American trade, the market may remain at their standstill absorbing Mr. Trump remarks about rates which turned sentiment in the market clearly dollar negative.
If US housing data misses its forecast showing a decline from the month prior, the downward pressure on the dollar could continue, as market begin to assess if the current tightening path of the Fed may in fact has already started to stifle growth. In that case the pressure on the Fed to ease could quickly mount and Mr. Trump’s words on Friday which were seen as just another riff from the President could take on the weight of policy in no time flat.
For now USDJPY remains in its long term uptrend, but the pair is approaching key support at the 110.50 level and a break below could signal a more significant shift in market sentiment suggesting that the dollar rally may be over for now.