FX Daily: Ending August on a high note

DXY stable, EUR met resistance, MYR overbought.
Philip Wee31 Aug 2021
    Photo credit: Unsplash Photo

    DXY was barely changed around 92.7.S&P 500 and Nasdaq Composite closed at new record highs overnight with the futures market looking for a strong finish to August today. However, investors are cautious about the rally extending September, a month known more for posting losses than gains. The Conference Board consumer confidence index is expected to slow to 123.0 (consensus) in August from 129.1 in July, in line with the fall in the University of Michigan consumer sentiment survey to 70.3 from 81.2. The US jobs report on Friday is the still most important event this week. Markets expect nonfarm payrolls to moderate from 943k in July to 750k in August, a level that will keep the Fed on track to taper asset purchases in late 2021.


    Focus on Eurozone inflation today. EUCPI estimate is expected to come in at 2.7% yoy (consensus) in August from 2.2% in July. Core inflation will double to 1.5% from 0.7% but remain below the new symmetric 2% target. ECB governing council member Robert Holzmann expects inflation to fall again next year. Germany reported that wage growth lagged inflation in 2Q. Speaking at an OECD event today, ECB Chief Economist Philip Lane will discuss how the new policy guidance can boost inflation expectations. Dr Lane believed that it is too early to discuss the end of the pandemic emergency purchase programme at the ECB meeting on 9 September. For a second time this month, EUR tried to appreciate above 1.18 but met resistance at its 50-day moving average.


    MYR is overbought according to its 14-day RSI readings above 70. Malaysian stocks rallied after Mr Ismail Sabri Yaakob was sworn in as Malaysia’s prime minister on 21 August. Cheering the temporary truce with the opposition, the FTSE Bursa KLCI index closed above 1600 yesterday for the first time since 30 April. USD/MYR fell back from just below 4.25 towards 4.15 during the same period. The new prime minister wants to boost adult vaccination rates to at least 50% in six Malaysian states over the coming month. Support from the opposition will be important for the 12th Malaysian Plan and Budget 2022 which will be tabled in parliament on 20 September and 29 October respectively.

    Philip Wee

    FX Strategist - G3 & Asia
    [email protected]

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