Moon Blots out the dollar

News   •   Aug 22, 2017 10:26 +08

Another squally trading session overnight to celebrate the first total solar eclipse to hit the continental US in 99 years.

A definite downside dollar bias emerged overnight, although recent ranges were respected. But with few particular dollar triggers amid a sparsely populated economic calendar, the market could be doing little more than getting their last licks in before a more active global calendar later in the week.

There were few attention grabbers on a very sombre Monday trading session as the market was left recirculating headlines in thinly traded conditions.

The Dollar slide appears to be associated with a WSJ report stating that "Draghi is likely to layout the end of Europes QE". This article has reignited top side interest in the Euro after those pesky anonymous ECB sources threw ice water on the notion just last week. Despite the questionable risk rewards, speculators can not resist the temptation to front run a possible central bank policy shift; the allure is just too strong.

Also, a Bloomberg report that stated Gary Cohn is emerging as the “clear front-runner” for the nomination to succeed Yellen as Fed Chair according to a National Association for Business Economics survey. Having Trump's top economic advisor manning the Holy Grail of central bankers would put the presidents stamp on the FED. While Cohn does not have a track record on monetary policy, In 2015, Cohn questioned Yellen for preparing to hike rates, saying she had “no legitimate argument to raise rates without inflation being close to – or having some inkling that it’s approaching – 2%.” Regardless of his current monetary views the uncertainty over the next Fed Chairperson is cause enough for a short-term short dollar punt.

1.2000 chatter is back in vogue this morning as the market is reading way too much into the WSJ article. Given the recent ECB minutes, it's unlikely Draghi is looking to ignite an aggressive EURO rally.

Japanese Yen

The market remains unpretentiously biased towards ‘risk-off’". In the absence of a Jackson Hole hawkish surprise from Dr Yellen, we should expect the USDJPY rallies to remain capped near term.