USD Holds Steady Amid Geopolitical Tensions, Economic Data Anticipation By Investing.com

The US dollar remained steady as markets processed rising geopolitical risks in the Middle East and awaited further US economic data.

The stability comes despite a general move towards safe-haven assets in currency markets, which has not resulted in a significant reduction in risks, HSBC said in a note published on Wednesday.

Domestic factors in other countries have reduced the appeal of their currencies as safe havens. For example, Japanese officials have advised caution on interest rate hikes, and the Bank of Japan governor has highlighted ongoing global economic uncertainties.

In Europe, European Central Bank (ECB) hawks fell silent, aligning with market expectations of a potential interest rate cut in October. The ECB Kazaks acknowledged the likelihood of a rate cut given the pronounced economic risks, although he noted that it was premature to conclude that inflation had been fully addressed.

Despite these favorable signals, the unemployment rate in the euro area remained stable at 6.4% in August. Market participants are now looking to the ECB’s Isabel Schnabel for indications of whether she will buck the market’s rosy expectations.

The Swiss National Bank (SNB) has indicated a reluctance to allow the Swiss franc to strengthen, with new president Martin Schlegel suggesting the use of monetary policy rates and potential interventions in the foreign exchange market.

Schlegel also noted that the risks to Swiss inflation are more downside, without ruling out negative interest rates. This position could influence the franc’s role as a safe haven, potentially making the US dollar or gold more attractive in times of heightened risk aversion.

In the United States, there were mixed signals from the labor market, with JOLTS data showing an increase in job openings, while the ISM manufacturing survey indicated a decline in the employment component. The market is now anticipating the release of the ADP private payrolls estimate, with consensus calling for a rise of 125,000 in September.

These data, along with upcoming speeches from Federal Reserve officials, could affect expectations for the November meeting of the Federal Open Market Committee (FOMC), where a 25 basis point rate cut is fully priced in, with a 40% chance at a 50 basis point discount. .

Finally, Moody’s (NYSE: ) upgraded Brazil’s sovereign rating outlook to Ba1, one notch below investment grade, while maintaining a positive outlook. This reflects Brazil’s strong growth and structural reforms, including the upcoming tax reform, which could contribute to long-term growth. Despite acknowledging fiscal challenges, Moody’s expects Brazil’s government debt to stabilize at around 82% of GDP over the medium term. This update may contribute to a decline in the USD-BRL exchange rate, in line with Moody’s year-end target.

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