Article Highlights

  • US labor market conditions index: 1.1 vs. 1.4 previous
  • Fed’s Fischer concerned over low inflation
  • Fed’s Lockhart: Fed close to raising rates
  • WSJ Fed watcher Jon Hilsenrath: inflation expectations could affect Fed rate hike schedule
  • Weak dollar pushes gold, oil prices higher
  • AU NAB business confidence report on tap
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It was a bad day to be a dollar bull yesterday, as forex traders dropped the Greenback like a hot potato. With no major data printed, what could have weighed on the dollar?

Uncle Sam didn’t release any economic report yesterday, so all eyes were on the Fed officials giving their speeches. Surprisingly, the overall tones were actually quite hawkish.

Fed’s Vice Chairman Stanley Fischer expressed his concern over low inflation but also recognized the improvements in the labor market. The spotlight then turned to Atlanta Fed President Dennis Lockhart, who said that “the point of lift-off is close” and that he’s “very disposed” to a September rate hike. How hawkish can you get, right? The only party pooper was Wall Street Journal’s Fed Watcher Jon Hilsenrath, who hinted that low inflation expectations could possibly delay a rate hike to a later date this year.

Whether it’s risk appetite from all the optimism both from the U.S. and Greece, traders paying more attention to Fischer’s cautious comments, or profit-taking from the dollar’s overbought levels, the Greenback ended up losing pips to its major counterparts.

EUR/USD popped up by 57 pips (+0.52%) to 1.1018 while GBP/USD also registered a 95-pip gain (+0.61%) to 1.5588. USD/JPY didn’t take too many hits though, with only a 4-pip slip to 124.59 while USD/CHF capped the session only 5 pips lower (-0.05%) to .9838.

Even the comdolls threw some punches at the dollar. Thanks to overall dollar weakness, prices of commodities like gold and oil got respite from their downtrends. Gold’s most actively traded contract rose to a three-week high at $1,104.10 per troy ounce while Brent crude oil popped up by 3.7% to $50.41 per barrel, its largest gain since mid-May. Yowza!

AUD/USD ended the session 45 pips higher (+0.61%) than its .7365 open price while NZD/USD also rose by 33 pips (+0.50%) to .6612.

The Loonie was the biggest winner though, as the pop in oil prices and a weak dollar both contributed to USD/CAD’s whopping 136-pip decline (-1.04%) to 1.3001. Similar moves were seen in CAD/JPY’s 93-pip journey (+0.98%) to 95.82 and EUR/CAD’s 75-pip slide (-0.52%) to 1.4324.

Asian session forex traders have a couple of reports to look forward to with China’s new loans data out at 12:30 am GMT, followed by Australia’s NB business confidence report at 1:30 am GMT. Market players aren’t expecting fireworks from these reports, but keep an eye out in case we see significant hits or misses that might affect risk appetite for the next couple of hours.

Good luck!

See also:

London Session Recap

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