The dollar regains height while waiting for Jackson Hole
The EUR/USD fell to a one-month low on Friday morning following reassuring economic figures in the United States. Weekly jobless claims came in unexpectedly lower as manufacturing activity in the Philadelphia district rebounded more than expected. These data are reassuring about economic activity, although they are not enough to change the trend for more than a year, namely the increasingly marked slowdown in American (and global) growth.
But the dollar is also benefiting from significant uncertainties in the other two major economic blocs. Nothing has changed on the side of Europe this week which is still facing an unprecedented energy crisis, but the situation has deteriorated in China, thus supporting the appetite for the greenback.
Beijing released very poor data earlier this week and the country’s central bank unexpectedly cut rates by 10 basis points. Nomura and Goldman Sachs have also lowered their growth forecasts for China, citing weaker demand, uncertainties linked to the health crisis and power shortages.
Changes in the global economic outlook will be particularly important for the opportunity market. An improved outlook would be beneficial for pro-cyclical currencies, especially the euro and the yuan as both economies are net exporters. Conversely, a deterioration in the outlook would increase pressure on the single currency, which seems most likely as long as the energy crisis persists in Europe and the health and real estate crises persist in China.
The next statistics to watch will be the S&P/Markit flash PMI indices for the month of August at the beginning of next week, then the Jackson Hole symposium at the end of next week. Jerome Powell will speak on several occasions during the symposium and could harden his hawkish tone given the marked increase in risk appetite in the markets which are easing financing conditions and therefore going against the current objective of the Fed to slow the economy.
EUR/USD daily price chart – key levels