The dollar strengthened as Jackson Hole symposium begins. PCE at 3.7%, GDP confirmed. Trade war with Canada escalates. Fed odds: 65% hold, 35% hike on Sept. 16.
Alpha Score of 58 reflects moderate overall profile with moderate momentum, weak value, strong quality, moderate sentiment.
The US dollar held recent gains against most major currencies on Thursday, with the annual Jackson Hole symposium of central bankers underway and Fed Chairman Kevin Warsh due to speak Friday. Traders are parsing the latest data for signals on whether the Fed will hold or hike at its Sept. 16 meeting.
US GDP for the second quarter, the second estimate released Aug. 26, matched the advance reading. Growth slowed from Q1 but remained strong relative to other advanced economies, economists noted. Personal consumption rose sharply, while non-military government spending fell. The final GDP revision is due Sept. 30.
The personal consumption expenditures price index, also out Aug. 26, came in at an annual 3.7% in July, slightly above the 3.6% consensus but within the range of forecasts. The core PCE reading for July matched expectations on both monthly and annual bases, analysts said. Headline inflation may have peaked given oil's retreat from mid-August highs, but that depends on the Gulf conflict, the analysts added.
Oil supply risks have eased somewhat after Iran and Oman on Aug. 25 agreed to share revenue from exports through the Strait of Hormuz, though it remains unclear when the strait might resume normal operations. Traders are also focused on recent Ukrainian strikes on Russian oil infrastructure, particularly in the Kuban region.
The US-Canada trade war escalated sharply on Aug. 23 after negotiations broke down. Canadian Prime Minister Mark Carney published a letter outlining unresolvable issues and his refusal to continue talks, which he said involved "unreasonable demands" from the US. The US responded with tariffs of up to 50% on various Canadian products beginning next year; Canada retaliated with further tariffs on US imports.
Fed funds futures still imply about a 65% probability of a hold at the Sept. 16 meeting and a 35% chance of a hike, according to CME FedWatch data. Roughly 75% of participants expect at least one hike by year-end. Warsh's Friday speech is the main near-term catalyst for rate expectations.
The euro continued its recent decline against the dollar on Aug. 27 after German consumer confidence came in moderately negative. The European Central Bank is widely expected to raise its main refinancing rate by 25 basis points to 2.65% at its meeting on Sept. 10, traders said. The euro's fall has been driven by dollar strength and lingering uncertainty over the Gulf, where there is no sign of serious US-Iran talks resuming, the traders added.
On EUR/USD charts, the $1.17 level stands out as resistance after price turned down from there on Aug. 21. The 23.6% weekly Fibonacci retracement near $1.16 is a possible support, but sellers may watch interaction with the 200-day SMA around $1.162. Volume and volatility have been thin in August, as is typical. The slow stochastic has left overbought territory. A move to $1.15 is possible but unlikely before Warsh's speech and next week's US nonfarm payrolls, analysts said. The key events for September are the ECB and Fed meetings on the 10th and 16th, respectively.
USDCAD has been driven by the breakdown in trade negotiations rather than the usual Gulf risk and rate differentials. The Canadian government viewed US demands as excessive and pulled out of talks, triggering reciprocal tariffs. The option of a Bank of Canada hike before year-end now looks very unlikely, traders said.
The loonie's bounce from the $1.375 area has been aggressive, with the slow stochastic now back near neutral. Price is testing the 20-day SMA after breaking above the 200 on Aug. 26. Resistance comes from the convergence of the 100-day SMA and the 61.8% weekly Fibonacci retracement near $1.396; the 50% Fibo at $1.41 is a further level. Volatility in USDCAD has been elevated all summer after a quiet May. A quick drop back to three-month lows near $1.375 is unlikely unless Warsh delivers a particularly hawkish speech, analysts said. The next major event is the simultaneous release of US and Canadian jobs data for August next week.
The opinions in this article are based on publicly available information and are not investment advice.
Drafted by a large language model from the source reporting linked above, then screened by automated publishing checks. It is not read by a journalist before publication. Some articles cite our Alpha Score. Verify prices and figures against the original source. Educational coverage, not personalized advice.