US Dollar on the Upswing as Markets Eye Fed Meeting Minutes

Talking Points:

• US Dollar gains on pre-position for hawkish FOMC meeting minutes
• Yen drops as Asian stocks rise, Aussie and NZ Dollars under pressure
• British Pound may not see lasting response to UK jobless claims data

The US Dollar outperformed in overnight trade as the markets’ attention turned to the upcoming release of minutes from July’s Federal Reserve monetary policy meeting. The currency rose alongside benchmark 10-year Treasury bond yields, suggesting investors may have been positioning for a hawkish posture.

Yesterday’s comments from Bill Dudley may have set the tone for pre-positioning. The New York Fed President said that the market is “complacent” about the need to hike rates and “under-pricing” the scope of on-coming tightening.

The central bank asserted that “near-term risks to the economic outlook have diminished” following the sit-down. Traders will be keen to see more about what lurks behind this assessment to gauge whether priced-in rate hike probabilities are indeed too low, as Mr Dudley argued.

The Japanese Yen slumped as Asian stocks pushed upward, sapping demand for the anti-risk currency. The Australian and New Zealand Dollars turned lower. A discrete catalyst was not readily apparent but the prospect of a more hawkish Fed may have applied outsized pressure on yield-sensitive high beta FX.

UK jobless claims headline the economic data docket in European hours, with a 9k increase expected. On balance, the release may have little lasting impact on the British Pound considering its limited implications for near-term BOE policy, with officials likely in wait-and-see mode having just expanded stimulus.

Asia Session

European Session

Critical Levels