FX market outlook

FX market outlook

Posted on Monday, August 21 2017 at 8:21 am GMT+0000

Washington drama continues to weigh on markets, investors await Jackson Hole

In the absence of any significant economic data releases during today’s Asian trading, the political drama surrounding President Trump continued to take central stage. The President fired his chief strategist Steve Bannon on Friday and in that way continued the string of staff shake up in the White House. The key event of this week will be the meeting of central bankers in Jackson Hole towards the end of the week.

Late on Friday, markets got another news out of Washington DC that President Trump fired his far-right chief strategist Steve Bannon and in that way ousted most of his closest allies since taking the office. While some investors saw this as a hope that Trump would become more moderate in his views without the advice of Mr. Bannon that was considered a far-right ideologist, many saw it as a potential hurdle for the President. Market participants are fearful that Mr. Bannon could potentially bring more harm as he would divide the White House by publicly going against those Trump advisors that he considers “globalists”. Mr. Bannon is considering starting a television network that would give him a strong propaganda tool.

Investors will be busy digesting a number of economic data releases from tomorrow, but the spotlight will be the central bankers’ meeting in Jackson Hole that is due to start on Thursday night. Market participants will be mostly interested in speeches by Janet Yellen and Mario Draghi that are due on Friday.

Looking at the reaction in the forex market, the dollar weakened against the yen to last trade at 109.11 yen. The dollar index held onto its early session gains as other major currencies weakened against the greenback. The index was trading at 93.54, up 0.10%, ahead of the European open.

The euro/dollar pair was trading at 1.1738 ahead of the European open, down 0.20%. The pound was also weaker against the greenback with the pair last trading at 1.2854. The aussie fell 0.10% against its US counterpart (last traded at $0.7918) and the kiwi was lower at $0.7308.

The oil-linked loonie weakened in the wake of falling oil prices. Dollar/loonie exchanged hands at 1.2600 ahead of the Asian close.

Oil prices fell during Asian trading, following Friday’s spike amid a tightening rig count. Prices rose around 3.5% after US Baker Hughes data showed a bigger than expected decline in new rig counts. However, prices were pressured today on rising US output despite the slowdown in the drilling activity. Brent was last trading at $52.67 a barrel while WTI was at $48.46.

Gold prices rose to trade at $1,287.48 an ounce ahead of European trading.