Forex Market Review (European Session) – Yellen induces dollar’s tumble, traders await Draghi for further moves

Forex Market Review (European Session) – Yellen induces dollar's tumble, traders await Draghi for further moves

The dollar tumbled against all majors following the speech of Federal Reserve Chair Yellen at the Jackson Hole symposium. The US currency managed to trade higher against the yen for most of the European session and got a small lift after the release of US durable goods data, but that was short-lived. The dollar index fell 0.43% to last trade at 92.89.

The US dollar traded around the value of 109.57 yen for most of the day leading up to Yellen’s speech. However, the greenback tumbled against all majors as soon as her speech was released to the public. The Fed Chair focused on financial stability and avoided addressing issues of interest such as the Fed’s next steps on monetary policy.

Looking at reactions in forex markets, the dollar was trading at 109.36 yen, the euro/dollar pair rose to 1.1855 and sterling reached $1.2854 in early exchanges during the US session. The antipodean currencies gained as well with the kiwi up at $0.7242 and the aussie recording a 0.51% gain to last trade at $0.7938.

Traders will be keeping their eyes on the Jackson Hole events, especially the speech by European Central Bank President Mario Draghi at 19:00 GMT.

The euro got an early boost above the key $1.18 mark following the release of the German Ifo Business Climate index. Based on the figure for August, the business climate in Germany is better than expectations (115.9 versus the forecasted level of 115.5). Also, expectations of businesses in Germany for the following six months are upbeat. The index came in at 107.9 against the forecasts of 106.8.

US durable goods orders were the main economic data release during late European session. The Commerce Department’s report for July signaled a mixed message for the start of the third quarter. Excluding transportation, orders for durable goods rose 0.5% last month, the third straight monthly gain, signaling that the US economy is picking up steam. However, orders for transportation equipment plunged 19%, weighing on the overall orders for durable goods. The latter fell 6.8% month-on-month in July, against expectations of a 6.0% decline and a 6.4% gain in June. Initially, the data boosted the dollar, but the gains were short-lived in the wake of Yellen’s speech.

Oil prices continued rising during the day on the news that the heart of the US oil industry is going to get hit by Hurricane Harvey that threatens to become the worst storm to hit the US in 12 years. WTI was last trading at $47.84 a barrel and Brent crude was at $52.41. Oil traders will be watching the Baker Hughes oil rig figures that are due later today.

On the back of the weakness in the US currency, gold prices rose to trade at $1,288.61 an ounce.

Source: Trade Forex with XM.

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