The US dollar strengthened today driven by positive economic data and optimism about the US economy’s resilience.
The Job Openings and Labor Turnover Survey (JOLTS) for June showed job openings decreased from 8.23 million to 8.18 million, exceeding analyst expectations.
The Fed closely watches JOLTS data as part of its assessment of the labor market and overall economic health.
Strong JOLTS numbers might influence the Fed to maintain higher interest rates to control inflation. A tight labor market (high job openings, low unemployment) can lead to wage growth, which contributes to inflationary pressures. A weak labor market may lead to rate cuts to stimulate growth.
The CB Consumer Confidence report for July showed an increase from 97.8 to 100.3, also exceeding expectations.
The report provides insights into consumers’ views on current economic conditions and their expectations for the near future. Extreme shifts in confidence can alert the Fed to potential economic risks, influencing their policy stance.
While the dollar edged up, gains were limited, as market participants exercised caution before the Fed’s announcement.
The Federal Reserve’s highly anticipated FOMC meeting takes center stage tomorrow, with market participants eagerly awaiting the central bank’s decision on interest rates
Will JPow come out as a hawk or a dove?
The pivotal question for tomorrow’s Federal Open Market Committee (FOMC) meeting, and its impact on stocks, bonds, and the US dollar is the strength with which the Fed signals a September rate cut.
Current market expectations, as reflected in Fed funds futures, point to a near-certain September rate cut.
The Fed will signal its decision through the “forward guidance” portion of the FOMC statement, released at 6:00 pm GMT / 2:00 pm EDT.
The key sentence to watch is:
“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”
If the Fed plans to signal a September rate cut, it will MODIFY this statement to reflect its increased confidence in achieving the 2% inflation target.
Aside from the statement, pay close attention to Fed Chair Powell’s comments during the press conference.
For more details on what to watch out for, read our Event Guide: FOMC Statement (July 2024) which is available for Premium members.
In this guide, we explore the market’s expectations, potential scenarios, and likely reactions to the Fed’s decision, with a special focus on the impact on the US dollar.
Currency Market Movers
Let’s review the price action in forex today.
Which currency pairs gained the most today?
NZD/CAD was the leader of the pack, gaining 0.47% or 38 pips.
As shown by our FX Market Movers page, the top 5 gainers had pretty small gains.
Looking at the NZD/CAD Trend Following Rating, it’s been showing a strong Bearish rating for almost a month.
But the NZD/CAD Overbought/Oversold Rating is showing a”Neutral” rating.
Which currency pairs lost the most today?
GBP/JPY was the biggest loser, falling 0.84% or 166 pips.
Currency Strength
What was the overall strength or weakness of individual major currencies today?
Based on the Currency Strength Meter on MarketMilk™, JPY was the strongest currency, while GBP was the weakest currency.
If we dive a little deeper and look at just how major currency pairs moved over the past 24 hours, we can see USD/JPY rallying during the Asian session and then plummeting during the NY session.
Currency Short-Term Trends
When it comes to short-term trend strength, the Japanese yen (JPY) shows the most bullish strength.
AUD, CAD, and GBP have bearish trends but are not currently that strong.
Currency Heat Map
If we take a look a look at our Currency Heat Map, we can see a mixed picture.
CAD is a currency to follow for continued weakness.
Currency Volatility
Which currency was the most volatile today?
Based on our Currency Volatility Meter, it’s the Japanese yen (JPY).
Which currency PAIR was the most volatile today?
Given that JPY was the most volatile currency, it has to be a JPY pair. But which one?
AUD/JPY. It moved over 1.82% or 182 pips.
