This week’s dearth of major macroeconomic announcements – just the usual, nothing with any direct bearing on the Dollar - could potentially see recent volatility calm down, but then there’s nothing like some flippant remarks from a Bank of England employee or Fed governor to get things going again! Some are observing that traders may be ‘overstimulated,’ but they’d do well to be so in my mind.

What happens to the US Dollar is as much about UK expectations of further economic uppers as it is about US expectations of further monetary downers. The Fed is desperate to have us believe it’ll raise rates, and traders are desperate to believe it. The BoE has made it clear it’ll ease further if need be – and guess what, traders believe it. I’m not saying they’re wrong. No one’s right or wrong. It’s like the oil price moving around every time someone from OPEC says something about freezing production. It happens. It’s annoying when we spend so much time pouring over complicated technical indicators, weighing things up and waxing lyrical about currencies as if we’re psychologists, but it happens!

A lack of data is more than made up for by some officials who want markets to remain on their guard and other who want to get things moving. Traders have two things to latch on to in the coming week: UK rate cut expectations and US rate hike expectations

The US Dollar Basket has climbed back about halfway from its trough post-Q2 US GDP print, and so have those rate hike expectations. GBP is under fresh pressure from BoE remarks about further stimulus, retracing much of its initial bounce. Don’t worry about the lack of data – there’s plenty of volatility ahead!

Augustin Eden 
Research Analyst
Accendo Markets

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