Are Currencies at the Cusp of a Turn?
- 9 July 2018
The US dollar traded lower against all of the major currencies in the first few days of the third quarter.
While it may be tempting to call this a peak, it is too early for all the bulls to retreat. The pullback in the dollar was modest with the best performing currency, the New Zealand dollar rising less than 1%. However, all of the major currencies traded higher against the greenback with EURUSD ending the week above 1.17. NZDUSD rose four out of the last five trading days and while AUDUSD also saw gains, its rally stopped at the top of its 3-week range. Most importantly, USDJPY ended the week above 110 because even though Friday’s labour market report fell short of expectations, the data is strong enough for the Federal Reserve to proceed with raising interest rates. Looking ahead, US traders should be back from their holidays and the increased liquidity will expand trading ranges. We expect additional dollar weakness at the start of the week followed by a possible recovery Friday when the Fed releases its monetary policy report.
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