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USD – United States Dollar
Federal Reserve Chairman Jerome Powell is in an awkward position before his speech in Jackson Hole this morning. According to Bloomberg, economists are warning that it is dangerous for the Fed to cut U.S. interest rates further when there are few signs of U.S. economic weakness. However, market participants and Trump are trying to convince Powell for more rate reductions to juice economic growth. The Fed’s likely response to this itchiness for rate cuts this week was the “release of the hawks.” Kansas City’s Esther George and Philadelphia’s Patrick Harker, who voiced their opposition to further easing, joined Boston’s Eric Rosengren’s pushback from earlier in the week.
The surprise this morning came from China, which announced that it would impose additional tariffs on a total of $75 billion of U.S. goods in retaliation for President Trump’s latest planned levies on Chinese imports. Some of the countermeasures will take effect starting September 1st, while the rest will come into effect on December 15th, according to the announcement from the Ministry of Commerce. This is the same as the timetable the U.S. laid out on China, with 10 percent tariffs on nearly $ 300 billion Chinese goods.
An extra 5 percent tariff will be put on American soybeans starting next month, and a 25 percent duty on U.S. cars will commence on December 15th. The U.S. equity market is dropping along with crude oil.
As we head into Jackson Hole, keep an eye out for central bank speakers. RBNZ Orr has already said, “We can afford to wait,” driving the NZD/USD pair higher towards 0.6396 in overnight trading.
In the U.K., according to Bloomberg, currency traders this week seemed to take Prime Minister Boris Johnson’s visits with Germany’s Angela Merkel and France’s Emmanuel Macron well, seeing some light at the end of the tunnel towards getting a deal done and avoiding a hard Brexit. The GBP/USD pair was the best performer during yesterday’s trading session.
In the European Union, one country where a potential stimulus is even more keenly in focus is Germany. The Bundesbank doesn’t think Germany needs anything to prop up the economy. It also expects another contraction of output in the second quarter. The EUR/USD is falling towards 1.1063 this morning, but market participants should tighten our seat belts because between new tariffs from China and the Jackson Hole event having vital central bankers speeches, it won’t be a quiet day this Friday in the FX market in North America.
USD/CAD: 1.3250 – 1.3400 ▲
EUR/USD: 1.1026 – 1.1249 ▼
GBP/USD: 1.2103 – 1.2325 ▼
AUD/USD: 0.6677 – 0.6822 ▼
NZD/USD: 0.6337 – 0.6429 ▲
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