The future trend of the yen and the US dollar was mainly driven by the policy factors of the two central banks, with the yen strengthening and the US dollar under pressure. Non-U.S. currencies mainly benefit from the growing downward trend of the U.S. dollar.
For example, the British pound hit a new high in the past three years, and the Canadian dollar gained the biggest weekly increase of the year. Looking forward to this week, a number of Fed officials will make public speeches, and it is worth paying attention to whether the speeches can maintain consistency in dovish stances.
In terms of economic data this week, U.S. inflation data, especially the core PCE price index, is more important: if the data is higher than expected, the decline in the US Dollar Index may ease. In addition, the performance of U.S. GDP revision and durable goods order data is also worth noting.
1. Global foreign exchange focus review and fundamental summary
Fed chairman releases strong signal to cut interest rates, the US Dollar Index falls sharply
the US Dollar Index fell to its lowest point since January last Friday, mainly because Federal Reserve Chairman Jerome Powell said at the Jackson Hole annual meeting that the Fed's confidence in inflation returning to 2% has increased, and hinted that the Fed may cut interest rates in September, or even open to a 50 basis point rate cut.
Powell's dovish remarks were also echoed by other Fed officials, and the market quickly reacted to the Fed's dovish remarks, which drove the US Dollar Index to fall sharply. The dollar may continue to be under pressure until more economic data is released.
UK inflation and other economic data support the pound to continue to rise and break through the high of more than 2 years ago
The pound extended its rally last week and reached its highest point since March 2022. The dovish turn of the Federal Reserve prompted the market to expect that the economic outlook of Britain and the United States will continue to diverge, which pushed the rise of the pound.
Although the Bank of England previously cut interest rates once in August, due to the resilience of the UK economy and stubborn inflation, the market now expects the Bank of England to cut interest rates less than twice in 2024, which is a gap compared to the Fed's rate cut expectations.
Hawkish remarks from Bank of Japan officials shake market economic data, dual factors push yen higher
The governor of the Bank of Japan delivered a speech to Diet last week, saying that as long as inflation and economic data are in line with expectations, the Bank of Japan will take rate hike action depending on market conditions.
Japan's higher-than-expected inflation data in July added variables to the economic outlook, with the consumer price index (CPI) rising 2.8% year-on-year, beating market expectations by 0.1%. The Bank of Japan's rate hike in July once reversed the downward trend of the yen, so the possible rate hike will still play a strong role in boosting the yen. According to a recent survey in Reuters, 57% of the economists surveyed believe that the yen will have a second rate hike this year, and the rate hike is expected to be in December.
2.2. Futures market position analysis
According to the 2024-08-20 futures market position report released by the U.S. Commodity Futures Commission, the total reported positions of various currencies last week are as follows: the net short position of the euro changed by 5,916 lots, the net short position of the Australian dollar changed by 5,172 lots, and the net short position of the British pound changed by 1,596 lots. The net short position of the Japanese yen changed by 4,254 lots, the net long position of the Canadian dollar changed by 1,856 lots, and the net short position of the New Zealand dollar changed by 956 lots.
Last week, there was no total long-short conversion currency. In addition, the currencies whose total one-way positions have changed by more than 20% are: Euro, Japanese yen and Canadian dollar.
3. Important observation indicators of the market outlook
Table 1: Data Publication
$NQ100 Index Main 2409 (NQmain) $$SP500 Index Main 2409 (ESmain) $$Dow Jones Index Main 2409 (YMmain) $$Gold Main 2412 (GCmain) $$Silver Main 2409 (SImain) $
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