- Rate hike probability down below 50% again – Moltke-Leth
- Jackson Hole/Yellen last chance to save the dollar – Hardy
- Commodities on track for biggest weekly gain in 7 weeks
- Gold’s trading range continues to narrow – Hansen
- Portugal yields depressed by rating speculation – Boye
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By Clare MacCarthy
The US dollar is broadly and deeply weaker early this European session after a Fed meeting minutes release failed to clarify the interest rate trajectory, Saxo Bank's strategy team report in their morning conference call. Conversely, European equities are higher as are core bonds while commodities are on track for their biggest weekly gain in seven weeks.
According to the meeting minutes Fed officials see very little outlook to higher inflation and the market's assessment of the probability of a rate hike this year has consequently fallen below 50%, reports Christoffer Moltke-Leth from Saxo's Singapore trading desk. USDJPY was hammered by the Fed's failure to provide sufficient clarity after what has been a murky few days and the pair spend the Asian session and the first few hours of European trading repeatedly seesawing around the psychologically important 100 mark.
But unsettling as this is we shouldn't expect any magic resolution in the immediate term and FX traders might do well to brace for further choppiness: "We're waiting for the Jackson Hole symposium and [Fed chair] Janet Yellen as the last chance to save the dollar," says John J Hardy, Saxo's head of forex strategy.
USDJPY and the magnetic attraction of 100:
Source: Saxo Bank. Create your own charts with SaxoTraderGO click here to learn more
The dollar weakness is supporting commodities (as they're priced in USD) and they're heading to end the week on a high with precious metals posting particularly impressive gains. That said, gold is struggling to make a definitive break to the upside despite the weak greenback and it appears lodged in an ever-narrowing trading range, reports Ole Hansen, Saxo's head of commodity strategy.
Crude oil is also being bolstered by a new US inventory report that revealed bigger than expected declines is stocks of crude, gasoline and Cushing inventories.
Gold’s trading range continues to narrow. Now between $1,339 and $1,360
Finally, as well as sparking safe-haven interest in the yen and precious metals, the Fed uncertainty has depressed European yields. One exception, though, is Portugal where yields are rising on speculation that the country might lose its investment grade status and with that, eligibility for the European Central Bank's asset purchase programme, reports Michael Boye of Saxo's fixed income team.
Waiting for Yellen is the new normal. Pic: iStock
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Editor’s note: From the Floor takes advantage of TradingFloor.com's unique real-time access to Saxo Bank’s various trading desks around the globe to put our community in touch with the developments that matter to their portfolios.