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Foreign exchange trading reminder on August 30: Powell hinted that the code reduction will be carried out in a gradual manner, the US dollar fell, commodity currencies soared
The U.S. dollar against the G-10 currency expanded its decline across the board after Fed Chairman Powell’s speech on August 27. Prior to this, Fed Chairman Powell said that it may begin to reduce the scale of bond purchases this year, but he will not rush to raise interest rates, thereby alleviating the market’s response to policymakers. Concerns about tight monetary policy. Commodity currencies climbed, the Norwegian Krone was the biggest winner, and the Australian dollar rose more than 1% against the US dollar. Speculative US dollar long positions were closed, and price movements were affected by option expiration, month-end capital flows, and weak market liquidity on the eve of the long weekend holiday in the UK.
On Friday (August 27), the US dollar index fell 0.41% to 92.68; the benchmark 10-year U.S. Treasury yield fell 3.11% to 1.307%, and it jumped to 1.375% on Thursday, the highest since August 12. Powell said in a pre-prepared video speech on Friday that significant progress has been made in achieving full employment. He believes that if the US economy improves as expected, it may be appropriate to start slowing down the pace of asset purchases this year. However, Powell said that the timing and pace of the reduction should not be interpreted as a signal of when interest rates will begin to rise.
Karl Schamotta, director of the global product and market strategy department of Cambridge Global Payments, said that the dollar fell because market participants significantly lowered their expectations for the trajectory of the Fed's long-term policy tightening.
David Petrosinelli, a senior trader at Insperex, said that Powell clearly wants to separate quantitative easing from "rate hikes," and he stated this very clearly.
Jim O'Sullivan, chief U.S. macro strategist at TD Securities, pointed out in the report that although the dollar may continue to weaken in the short term, "the decline may be short-lived and the magnitude is very limited."
The euro to US dollar rose 0.37% to 1.1795 US dollars, showing its first fall in five trading days on Thursday; within 30 minutes after Powell’s speech, euro futures trading volume jumped to the highest level since July 13; traders pointed out August 13 The daily high of 1.1805 is the key pivot.
Commodity currencies such as the Australian dollar led the rise, which may benefit from re-inflation bets such as rising gold prices, as well as investors' month-end portfolio adjustments. The Australian dollar rose 1.04% to US$0.7312 against the US dollar, a 10-day high; the New Zealand dollar rose 0.91% to the US dollar to 0.7011. The U.S. dollar fell 1.45% against the Norwegian Krone to 8.7131 kronor. The Krone and the month's gains were ahead of other G-10 currencies; the Norwegian krone was helped by the sharp rise in oil prices. The euro fell to its lowest level against the Norwegian Krone since July 13. Traders pointed out that after Powell’s speech, there was a buying interest in high beta coins, but the flow of funds was not large.
The U.S. dollar fell 0.53% to 1.2620 against the Canadian dollar; Marc Chandler, managing director of BK Asset Management, said that the trend of the Canadian dollar is usually affected by oil, risk sentiment represented by the S&P 500 index, and interest rate differentials. The strength of the Canadian dollar today is not greatly affected by the situation in Canada, but reflects the situation in the United States and the market's interpretation of Powell's speech.
Monday preview
| time | area | index | The former value | Predictive value |
| 17:00 | Eurozone | August Economic Sentiment Index | 119 | |
| 17:00 | Eurozone | August Industrial Climate Index | 14.6 | |
| 17:00 | Eurozone | August final value of consumer confidence index | -5.3 | |
| 17:00 | South Africa | Annual rate of gold production in June (%) | 44.5 | |
| 20:00 | Germany | Initial value of CPI annual rate in August (%) | 3.8 | |
| 22:00 | America | Monthly rate of existing home contracted sales index after seasonal adjustment in July (%) | -1.9 | -0.2 |
London Stock Exchange, UK Bank holiday, closed for one day
Summary of Institutional Views
Interpretation of Powell's Speech Organization
Gregory Anderson, Global Head of Foreign Exchange Strategy, Bank of Montreal Capital Markets: The speech showed that Powell did not take a hawkish stance like some Fed officials. Obviously, if you were worried about the timetable before, that is, the reduction was announced in September and the action started on October 1, then today's speech did not mention this. Based on the most extreme hawkish views, today’s speech is not as bad as feared.
Financial website Forexlive analyst Adam: After the Federal Reserve Chairman Powell's speech was released, the dollar is falling. His speech is not a signal to reduce quantitative easing. He did not provide reasons and timing for debt reduction like other Fed officials. Instead, he said he will continue to focus on the delta mutant strain and employment. If he does not signal the debt reduction in September now, the possibility of the Fed's announcement of a reduction in debt purchases in September is very low.
Societe Generale: The pound is expected to rebound strongly after breaking through 1.3800 against the dollar
Societe Generale said that the weaker U.S. dollar will drive the pound to rise. The pound is expected to record a rise for the first week in three weeks. After breaking through 1.3800, it will usher in a greater rebound. The exchange rate is still trying to recover the 200-day moving average and the daily Ichimoku equilibrium at 1.3800. Nearby, in order to achieve a meaningful rebound, it is crucial to recover this resistance level. On the downside, the July low of 1.3570 has been constructed as an important support level.
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