IFX Market Report: Monday 24th August 2020

On Friday we finally saw the Dollar Index catch a bid – marking its first weekly gain since June. The index was up by 0.5% on the day, able to sustain itself above the 93 mark. This move comes ahead of an important week for the US, with the Jackson Hole Symposium headline speech from FED Chair Jerome Powell on Thursday, and the Republican National Convention (RNC) starting today.

EURUSD was clearly impacted by the move in the dollar index – starting the day off at 1.1844, the pair lost significant ground, and closed the day off at 1.1733.

Cable was also down by more than 1% on Friday. The pair start the day trading strong at 1.3229, before shedding all the gains it had made in the past 5 days, to end the week at 1.3097.

All eyes will be on Jerome Powell on Thursday as he is expected to give a review of monetary policy and the FED's current outlook. In sum, the message from Powell thus far, has been that they will support financial stability and economic integrity by adjusting the size of its balance sheet and the kinds of assets they purchase within the scope of their mandate. An emphasis on this message is likely to prompt a dollar sell-off, yet at the same time, there is a big chance that the FED Chair may not want to give too much away ahead of a FOMC rate decision on 16th September.

With the RNC also starting this week, any controversial comments from Mr Trump may also impact the markets. Joe Biden, after the DNC last week, has increased in popularity and continues to widen his gap on Trump in the polls.

After the first week of Brexit negotiations concluded, Michel Barnier noted that he was “disappointed” and “concerned” with the EU and the UK’s lack of development. His UK counterpart, David Frost, also said that “little progress” had been made, amid differences on fishing policy and state aid rules. In a statement released after the talks, Mr Frost went as far to say that the EU has made it “unnecessarily difficult” to make progress.

GBPEUR was somewhat unphased by these comments on Friday; the pair opened the session still safely above the 1.11 handle at 1.1156, before depreciating only slightly, ending the week at 1.1124.

On the data front, it is an extremely quiet schedule today with almost nothing of note. Tomorrow however, at 07:00 we have Q2 GDP from Germany, followed by their IFO report at 09:00. Then in the afternoon at 15:00 we have the CB Consumer Confidence from the US.

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