Fed Minutes May Temper Hawkish Dots
• The FOMC minutes are likely to be less hawkish than the economic forecast, for which there apparently was not even a discussion.
• The Reserve Bank of Australia is likely to make adjustment to its asset purchases and three-year interest rate target under its yield-curve control policy.
• Canada lost jobs in April and May but likely grew jobs again in June. A better employment report coupled with optimism about H2 would still leave the Bank of Canada to wind down its bond buying this year.
• China’s CPI has been kept in check by the easing of food prices. The PPI is more correlated to the US CPI and may have softened in June.
• The G20 meeting needs to be understood within the context of US-China rivalry, and since the details of the tax reform and carbon adjustment taxes, there is no need to spend political capital now. The next G20 summit, in October, will be more important forum.
The second half is getting underway. Five events should be on your radar screen, but do not lose sight of the broader context. This year, the dollar has often experienced near-term trend changes around the turn of the month and the US jobs report.
Consider the Dollar Index, albeit an imperfect metric. The low for the year was recorded three days into January. It put in a high in early February and bottomed two days before the end of the month. The peak so far for the year was recorded on March 31, and then it trended lower in April before bouncing a little more than 1% into the end of the month and early May. Finally, it recorded a four-month low in late May and moved higher in June with two steps, before and after the FOMC meeting.
A two-month high was recorded a couple of days after the seemingly hawkish surprise by the FOMC. The price action signs warn a new marginal high is possible, but the dollar’s upside correction appears to be well advanced from a technical perspective. We suspect a peak is near.
Bannockburn Global Forex