Dovish Powell speech sees Dollar sliding weaker
After a dovish speech at Jackson Hole by Jerome Powell, the Dollar has traded toward its lowest point since July 2023. The Dollar index has dipped to 100.70 this morning, with the Euro trading above 1.1200 earlier and the Pound trading at a two-year high against the Greenback. The Yen has also firmed further against the Dollar, extending its gains below the 144.00 mark and back to January 2024 levels.
Rate cut bets are now pricing in a 60% chance for a 25bps cut, while the expectation of a 50bps cut has increased to nearly 40%.
Emerging market currencies also benefited from the softer Dollar and the Rand closed Friday’s session just above the R17.70 handle, continuing what has been a stellar recovery by the local currency during August.
Focus in the coming weeks will shift towards the Labour data in the US, with concerns over the Labour market being highlighted by the FOMC as one of their main concerns. Still, US GDP and PCE data out this week could also play a role in the expectations for September’s rate cut.
Tensions in the Middle East and the risk of a broader conflict have further raised concerns, leading to Oil prices consolidating as supply concerns increase. After trading close to 1-year lows last week, Brent Crude is in touching distance of $80 per barrel. Gold continues its stellar performance this year, as the yellow metal still hovers above the $2,500 mark.