A few more thoughts on Friday – Commerzbank

Currency markets saw little movement yesterday. It almost looked like the markets were still recovering from the weekend and the Jackson Hole Fed Symposium. After losing value against all G10 currencies on Friday, the US dollar (USD) managed to recover somewhat against most currencies yesterday, although the news was very weak on the ground, at least for the currency markets. San Francisco Fed President Mary Daly didn’t say anything new yesterday when she reiterated that the time for rate cuts has arrived and that, of course, the path of rate cuts is still unknown, Commerzbank FX strategist Volkmar Baur notes.

The Fed has everything it needs for September

“I think Jerome Powell surprised the markets with his dovish comments on Friday, even though as of Friday morning we still thought that was unlikely. I had not heard such a clear statement that the first move should come in September. they changed the way the market had already set the price, reduced the risk around that assumption. The key point is that the risk has only been eliminated on one side. That’s why the market priced in a higher probability of a 50 basis point move in September on Friday night.

“I find the discussion of data reliance versus forward guidance interesting. Of course, the central bank will emphasize that it has not yet made a decision and will include this in the word “data dependent”. However, there is only one more jobs report before the September meeting. And as we know, this time series is very volatile and there are first revisions, second revisions, and others after that, so don’t rely too much on this. latest employment report, even if it surprises a little one way or another. Of course, the central bank is data-dependent, but 95 percent of what it needs to know for its September meeting should already be available. And maybe I should point that out sometimes.”