Talking Points

  • Euro: ECB Looks At Secret Yield Cap, German's Schaeuble Criticizes Greek Extension
  • British Pound: BoE's Weale Endorses Wait-And-See Approach, RSI Flirts With Overbought
  • U.S. Dollar: Pares Losses Following FOMC Minutes, Mixed Views Surrounding Jackson Hole

Euro: ECB Looks At Secret Yield Cap, German's Schaeuble Criticizes Greek Extension

The Euro advanced to a fresh monthly high of 1.2571 amid reports that the European Central Bank is looking to implement a secret yield ceiling on Spanish and Italian debt, but we may see the Governing Council struggle to meet on common ground as the bond purchase program comes under increased scrutiny. Meanwhile, German Finance Minister Wolfgang Schaeuble argued that giving Greece additional time to meet its budget target is not the solution as it translates into providing additional assistance, and went onto say that the euro-area has 'gone to the limit' in aiding the region as it struggles to get its house in order.

In response, Greek Prime Minister Antonis Samaras warned that a Greek exit would set precedence and trigger a domino effect across the monetary union, and we may see a growing rift within the EU as the governments operating under the fixed-exchange rate continue to act in their own interest. Indeed, the EURUSD may continue to retrace the decline from the previous month as it breaks out of the range-bound price action from earlier this month, but we will be keeping a close eye on the relative strength index as it approaches oversold territory. At the same time, the 100-Day SMA (1.2615) will serve as an important indicator as it lines up with the downward trend line from back in 2011, and we may see the short-term rally taper off ahead of September as European policy makers struggle to restore investor confidence.

British Pound: BoE's Weale Endorses Wait-And-See Approach, RSI Flirts With Overbought

The British Pound struggled to maintain the overnight advance to 1.5911 despite the rise in private sector borrowing, and the pullback in the GBPUSD may be short-lived as the Bank of England continues to endorse a wait-and-see approach for the near-term. Although the BoE continues to discuss the potential for more quantitative easing, MPC board member Martin Weale argued that there is no need to expand the asset purchase target in the current environment, and we may see the central bank preserve its current policy throughout the remainder of the year as the new lending program is expected to strengthen the recovery. As the relative strength index on the GBPUSD pullback ahead of overbought territory, we may see a short-term correction in the days ahead, but we will be looking for a series of higher highs and higher lows in the exchange rate as the upward trending channel from July continues to take shape.

U.S. Dollar: Pares Losses Following FOMC Minutes, Mixed Views Surrounding Jackson Hole

The greenback appears to be regaining its footing on Thursday, with the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDOLLAR) bouncing back from an overnight low of 9,938, and the reserve currency may continue to recoup the losses following the FOMC Minutes amid the mixed views surrounding the Jackson Hole Economic Symposium on tap for next week. As the policy statement talked up speculation for another round on quantitative easing, there's bets that Fed Chairman Ben Bernanke may hint at QE3 ahead of the September meeting, but the central bank head may strike a more balanced tone for monetary policy as the recent batch of data coming out of the world's largest economy reflects a more robust recovery. In turn, we may see the dollar consolidate ahead of the Fed conference, and the fresh batch of central bank rhetoric may set the tone for September as market participants weigh the prospects for future policy.

FX Upcoming

CurrencyGMTEDTReleaseExpectedPrior
EUR14:0010:00Euro-Zone Consumer Confidence (AUG A)-22.0-21.5 
USD14:0010:00New Home Sales (JUL)365K350K 
USD14:0010:00New Home Sales (MoM) (JUL)4.3%-8.4% 
USD14:0010:00House Price Index (MoM) (JUN)0.5%0.8% 
USD14:0010:00House Price Purchase Index (QoQ) (2Q) 0.6% 
NZD22:4518:45Trade Balance (New Zealand dollars) (JUL)-47M331M 
NZD22:4518:45Balance (YTD) (New Zealand dollars) (JUL)-647M-747M 
NZD22:4518:45Exports (New Zealand dollars) (JUL)3.78B4.20B 
NZD22:4518:45Imports (New Zealand dollars) (JUL)3.76B3.87B 
AUD23:3019:30RBA Governor Glenn Stevens Testifies on Monetary Policy   

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong

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