The US dollar is modestly higher as North American traders arrive for the final trading day of the week, but the changes are limited. The USD is higher against the EUR, JPY, GBP, CHF, CAD and NZD, while it is marginally lower against the AUD.
The low-to-high trading ranges are also narrow:
- EURUSD: 15 pips
- USDJPY: 39 pips
- GBPUSD: 17 pips
- USDCHF: 20 pips
- USDCAD: 14 pips
- AUDUSD: 14 pips
- NZDUSD: 17 pips
The narrow ranges reflect a market waiting for the next catalyst. That opens the door for range extensions as North American traders enter and the key events begin to unfold. Of course, there IS a key event ahead. More in a bit.
Before that, the US Treasury yields are modestly higher, with the curve steepening as the largest increases are toward the long end:
- 2-year yield: 4.234%, up 0.2 basis points
- 5-year yield: 4.407%, up 1.1 basis points
- 10-year yield: 4.688%, up 1.6 basis points
- 30-year yield: 5.209%, up 1.8 basis points
The major event will be Fed Chair Kevin Warsh’s keynote address at the Jackson Hole Economic Policy Symposium at 10:00 AM ET. It will be his first Jackson Hole keynote since becoming Fed chair in May. The broader symposium is focused on “Financial Innovation — Implications for Payments and Policy,” but traders will also listen closely for clues about Warsh’s views on inflation, growth, the Treasury market and the path of monetary policy. With the Fed having kept rates unchanged at its two meetings under Warsh, the market will be particularly sensitive to anything that changes expectations for the September meeting.
At 8:30 AM ET, Canada will release its second-quarter GDP report. Annualized growth is expected at 3.4%, rebounding sharply from the revised 0.1% contraction in the first quarter. June GDP is expected to rise 0.2% after increasing 0.3% in May.
At 10:00 AM ET, the final University of Michigan survey for August will be released:
- Consumer sentiment: 51.0 expected versus 51.0 preliminary and 55.2 in July
- Current conditions: 51.8 expected versus 51.8 preliminary and 54.8 in July
- Expectations: 50.6 preliminary versus 55.4 in July
- One-year inflation expectations: 4.3% preliminary versus 4.2% in July
- Five-year inflation expectations: 3.3% preliminary versus 3.3% in July
The sentiment data will compete with Warsh’s speech for attention. However, any revisions to inflation expectations could influence Treasury yields and the dollar, especially if they reinforce—or challenge—the message from the Fed chair.
In the pre-market for the US stock market, the major indices are trading
- Dow is up 14.56 points
- S&P is down -13 points
- Nasdaq 100 is down -105 points.
In the Middle East, attention remains focused on diplomatic efforts to reopen the Strait of Hormuz. Iran has agreed to prepare a list of conditions for restoring normal maritime traffic, while Qatar and Oman are involved in efforts to find a workable arrangement. Some tanker traffic has resumed, but flows remain well below normal and US-Iran negotiations are still deadlocked. Crude oil is little changed today but is on pace for a weekly decline, suggesting the market is cautiously pricing in improved shipping conditions while retaining a geopolitical risk premium.
For traders, the combination of narrow overnight ranges, modestly higher yields and significant event risk creates the potential for momentum later in the session. The technical levels will help define the bias, risk and targets once the market makes its next move. Be aware. Be prepared
This article was written by Greg Michalowski at investinglive.com.