USD Strengthens Against Major Counterparts Amid Hawkish Fed Comments
Daily FX Wrap
Gains in the USD fueled price action across FX markets, in what has been a relatively quiet start to the week thus far.
USD strengthened against its major counterparts around the North American crossover amid hawkish comments from Fed’s Bullard and weekend comments from Fed’s Williams. Furthermore, weakness in JPY bolstered the USD, which subsequently weighed upon EUR.
Feds Bullard said on CNBC that he believed that the timing was right for rate lift-off and went on to state that October remains a possibility for increasing rates, having said over the weekend that the Fed has overplayed the recent market volatility in delaying a rate hike last week. Fed’s Williams also noted over the weekend that hiking rates this year would be appropriate.
USD strength came in conjunction with JPY weakness with interest rate differential flows between USD and JPY widening, as source reports last night claimed that the BoJ may overhaul its QQE program with an increase in its JPY80 trillion monetary base in order to reach its 2% inflation target. The weakness in JPY was exacerbated by Japanese participants being away from market observing a national holiday, and thus lighter trading volumes were observed.
The resulting USD strength weighed upon EUR with EUR/GBP breaking below its September lows of 0.7241 and weakness was also evident in EUR/USD with the pair breaking below its 200DMA at 1.1216.
Looking ahead, the calendar tomorrow is relatively light in terms of data, however notable speakers include BoE’s Shafik and the Fed’s Lacker.