Dollar in “Wait and See” Mode Ahead of Powell Speech

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Dollar in “Wait and See” Mode Ahead of Powell Speech

AUGUST 25, 2021

The U.S dollar is mostly flat today as it appears we are entering “wait and see” mode ahead of the much-anticipated speech by Federal Reserve Chair Jerome Powell. 

Overview

It is likely that Powell will give guidance as to when the central bank will start “tapering” it’s monetary easing.  Minutes from the last FOMC meeting showed that most policymakers believe that it would be appropriate to start reducing stimulus this calendar year.

While Fed chief Jerome Powell will give a speech on Friday, there will be plenty of other speakers at the symposium that runs from Thursday through Saturday.

The Treasury will hold a bond auction at 1 pm today which might play into currency movements.

This morning’s economic docket showed that durable goods orders fell 0.1% in July, better than the dour forecast of a 0.3% contraction.  However, the data has not been able to spark volatility in the minutes following its release.

What to Watch Today…

  • US Treasury Auction at 1 p.m.

View Economic Calendar

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EUR   

The Euro opened the session mostly flat from yesterday but has declined a touch in early trading.  Data showed that German business confidence fell on increasing concerns that supply chain squeezes will sour economic recovery.  According to the IFO Institute, confidence fell to 99.4 in August, from 100.7 in July. The dip was more than economists had forecast.

Germany has a strong manufacturing sector that is being held back by shortages in parts and raw materials due to persistent supply chain issues and port closures in Asia, an issue that is likely to carry on into 2022.

CAD   

Commodity-based currencies are largely holding on to gains experienced during the first half of the week.  However, the Canadian dollar is losing in early trading despite the price of oil remaining steady after experiencing its largest two-day gain since November.
The price of iron ore extended its recent rebound, helping the Aussie and South African rand.  And the New Zealand dollar is holding on to its sharp gains from yesterday after the Reserve Bank of New Zealand confirmed a rate hike is coming in the near future.

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