Intraday Market Thoughts

USD Extends Bounce on Data

by Adam Button
Aug 30, 2017 22:31

Tentative signs of a turnaround turned into something more concrete Wednesday as the US dollar rally continued on strong data. The USD was the top performer while the Swiss franc lagged. USDX finally regains its 200-week MA, a triple bottom beckons, USD jobs around the corner and a potential Draghi jawboning is less than 10 days away. Seems like the perfect USD play. Ashraf's special-edition Premium video on how to play the USD stabilisation.

We wrote yesterday about the positive signs in the US dollar but worried that it hadn't come with any upper-tier data. That changed Wednesday on strong growth and jobs numbers. Q2 GDP was revised to 3.0% from 2.7% on strong corporate profits and consumer spending. The ADP employment report hit a 5-month high at 237K compared to 185K expected.

On the political front, speculation also mounted that relief funding from Hurricane Harvey will make it easier to raise the debt ceiling, at least for a short time. Trump also focused on corporate tax cuts in a speech in Missouri. 

The moves in the dollar were substantial. After rising as high as 1.2070 a day ago, EUR/USD sank to 1.1881 and finished on the lows. The commodity currencies were also hit hard late in the day as AUD/USD fell a full cent from the highs in an outside reversal. USD/CAD was one of the reversals we highlighted yesterday and that pair posted its best day in four weeks, climbing 120 pips.

The loonie will stay in focus in the day ahead with Canada delivering the first report on Q2 GDP. Expectations are for a sparking 3.7% reading but the risks are to the downside after soft current account numbers Wednesday.

A full slate of data is up beforehand including the China official PMIs, Australian private sector credit, speeches from the BOJ's Masai and RBA's Harris. That's followed by German retail sales, French CPI, Eurozone CPI, a speech from the BoE's Sanders, the US PCE report and the Chicago PMI among others.

It's safe to say that the summer lull is over.

Act Exp Prev GMT
GDP (m/m)
0.1% 0.6% Aug 31 12:30
Chicago PMI
59.6 58.9 Aug 31 13:45
Germany Retail Sales (m/m)
-0.6% 1.1% Aug 31 6:00
Eurozone CPI Flash Estimate (y/y)
1.4% 1.3% Aug 31 9:00
France Prelim CPI (m/m)
0.5% -0.3% Aug 31 6:45

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