USD: FOMC minutes were old news
The dollar is little changed after last night's release of the FOMC minutes for July. That FOMC meeting was held before the release of the July jobs data – meaning that all the references to a 'solid' jobs market in those minutes are now under scrutiny. Instead, we're all waiting on tomorrow's speech from Fed Chair Jerome Powell as to how significantly the Fed registered the substantial downward revisions to back-month job data. Before then, at 1330CET today, we'll have a speech from the Fed's Raphael Bostic. He's recently been saying he could vote for a rate cut soon, although one rate cut this year is his preferred adjustment.
One interesting snippet for FX markets in those FOMC minutes were remarks that the available data showed 'relative stability' in foreign holdings of US assets. In other words, any tariff-driven exodus from US asset markets doesn't seem to be extending.
Today's US data calendar sees the weekly initial claims data, the S&P PMIs and July existing home sales data. We're neutral/slightly bearish on the dollar and see continued strong performance of Chinese asset markets (see below) as a mild dollar negative.
98.00-98.50 looks to be the DXY range into tomorrow's speech from Chair Powell. Political pressure on the Fed's Lisa Cook to resign briefly weighed on the dollar yesterday. We doubt the dollar needs to sell off much more on this story given that President Trump frequently calls on Jay Powell to resign immediately as well.
EUR: August PMIs in focus
EUR/USD is becalmed. It's fair to say that the optimism over a potential ceasefire/peace deal in Ukraine is now fading, as evidenced by EUR/CHF dropping back down to 0.9370. Russian Foreign Minister Sergei Lavrov's assertion yesterday that Russia and China would have to be part of any future security guarantees suggests the West and Russia remain far apart. Indeed, it feels like the next move here is for Washington to swing back behind secondary sanctions. We note oil and natural gas have gone bid over the last 24 hours. That's a mild euro negative.
On the calendar today are the flash August PMIs for France, Germany and the eurozone. Consensus is expecting no major improvement here.
We may see another tight 1.1620-1.1670 trading range in EUR/USD today, with the biggest chance of a breakout remaining Powell's speech tomorrow.
NOK: 2Q growth much better than expected
Norway has just released much better than expected second-quarter data at 0.8% QoQ, with positive revisions for the first quarter. Markets had been pricing a 75bp easing cycle from Norges Bank over the next 12 months, but the data may question whether Norges Bank is ready to deliver another 25bp rate cut this year. With a policy rate at 4.2%, the high-beta Norwegian krone remains one of the G10 high yielders.
We have EUR/NOK targets at 11.75 and 11.65 for the end third and fourth quarters, respectively, this year. Today's GDP data is helpful.
