Risk on trading in the Asian session saw safe haven JPY and USD decline versus major peers.
\nInaction from the ECB could support the Euro, dragging on the USD .
\nDXY creating bear flag pattern at key support. Could the greenback come under further pressure?<\/p>\n
The perceived risky Australian Dollar trended higher in the Asian session whilst safe havens \u00a0Japanese Yen and US Dollar slipped southwards against major peers, even though the US Senate ruled out additional fiscal \u00a0stimulus being agreed to prior to the November elections.<\/p>\n
The Australian ASX 200 declined. The Japanese Nikkei 225 advanced 0.74%.<\/p>\n
Gold and silver fell lower \u00a0US 10-year Treasury yields pulled back sub 0.69%.<\/p>\n
Coming up, US inflation data could provide some directional impetus ahead of next week\u2019s FOMC monetary policy decision.<\/p>\n
ECB To Spark DXY Selloff?<\/strong><\/p>\n The European Central Bank left monetary policy unchanged. This could support the Euro \u00a0in the short-term versus the US Dollar – potentially sending the Dollar Index (DXY) back towards its yearly low (EUR accounts for over 57% of DXY Index (DXY).<\/p>\n ECB President Christine Lagarde acknowledged \u00a0Chief Economist Philip Lane\u2019s concerns over recent Euro strength. However, she didn\u2019t talk down the Euro, instead reminding that \u201cour mandate is price stability\u201d. She added that the central bank will \u201cmonitor carefully\u201d given the negative pressure on prices that a strong Euro brings..<\/p>\n Her comments indicate that not all policy makers are worried about the value of the Euro and it\u2019s 12% rally against the greenback since the end of March. Even though Christine Lagarde reconfirmed the ECB\u2019s \u201caccommodative monetary policy stance\u201d any additional stimulus measures appear to be off the table at least in the near term.<\/p>\n Will the central bank will maintain the status quo in the coming months? It is too early to tell given the uncertainties surrounding the strength of the recovery and success in containing coronavirus.<\/p>\n Lagarde\u2019s message that the ECB \u201cdoes not target the exchange rate\u201d is expected to underpin the common currency across the coming weeks and \u00a0potentially dampen demand \u00a0for the US Dollar Index.<\/p>\n Congressional Deadlock To Direct The Fed<\/strong><\/p>\n The Federal Reserve\u2019s monetary policy meeting, the Open Market Committee (FOMC) on September 16 could also pressurise the US Dollar versus it\u2019s major peers, as the Fed will also release the updated Summary of Economic Projections (SEP).<\/p>\n The Fed\u2019s balance sheet has steadied since peaking on at $7.17 trillion on June 10. However, the central bank\u2019s shift to average inflation targeting (AIT) points to the Fed expanding its quantitative easing program as 5-year inflation expectations show signs of running out of steam around1.6%.<\/p>\n In light of Federal Reserve Chairman Jerome Powell\u2019s comments that \u201cwell-anchored inflation expectations are critical for giving the Fed the latitude to support employment when necessary\u201d the chances of the Fed sticking with the status quo seem relatively low.<\/p>\n Let\u2019s not forget with initial and continuing jobless claims still coming in worse than expected and Congress failing to agree to additional fiscal stimulus, market participants could be hoping that the Fed will pick up the pieces in order to achieve its dual mandate \u201cmaximum employment and price stability goals\u201d.<\/p>\n Continuing jobless claims (week ending August 29) rose to 13.38 million, above the 13.29 million claims forecast. Meanwhile, initial jobless claims remained unchanged at 884,000.<\/p>\n Therefore. the US Dollar Index could continue to trend southwards from the yearly high struck in March, if Congress agrees another rescue package.<\/p>\n","protected":false},"excerpt":{"rendered":" Risk on trading in the Asian session saw safe haven JPY and USD decline versus major peers. Inaction from the ECB could support the Euro, dragging on the USD . DXY creating bear flag pattern at key support. Could the greenback come under further pressure? The perceived risky Australian Dollar trended higher in the Asian […]<\/p>\n","protected":false},"author":163946597,"featured_media":5438,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1381],"tags":[3135,1398],"class_list":["post-104540","post","type-post","status-publish","format-standard","has-post-thumbnail","category-usd","tag-dxy","tag-usd"],"acf":[],"yoast_head":"\n