USD: How bad is the data and what is the Fed going to do about it? – ING
08.08.2024, 11:06

USD: How bad is the data and what is the Fed going to do about it? – ING

Some high-profile equity markets have seen their recoveries stall at key technical levels such as 5300 for the S&P 500 and 36,000 for the Nikkei 255. Technical analysts would like to see these markets close above those key technical levels before declaring that this corrective phase is over, ING’s FX strategist Chris Turner notes.

DXY may well be capped at 103.15/50

“Determining whether those equity corrections continue or fizzle out will be the combination of US data and Fedspeak. At the heart of the investment story is the issue of whether the US economy is going into recession. A recession without a Fed response could mean a flatter/inverted yield curve, heavy equity losses and a stronger US Dollar (USD).”

“Softer US data and a Fed response – perhaps signalled at the Jackson Hole symposium in two weeks – would deliver a steeper yield curve, more stability/recovery in risk assets and a broadly weaker USD.  We are more in the latter camp here and think that the dollar can soften more broadly over the next couple of months.”

“For today, let's look out for initial claims. A higher figure will add to fears of rising unemployment and a Fed response. This is a dollar negative. DXY may well be capped at 103.15/50 on any rallies, with a bias to press 102 over the coming weeks.”

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