Greenback Roller Coaster

The past weekend and on into Monday, we saw the USD strengthen as Fed Vice Chairman Stanley Fischer’s positive remarks about the US economy and inflation targets prompted speculation of a rate hike as soon as September.

Gains were short lived as overnight into Tuesday, Forex traders quickly forgot the recent hawkish comments and the USD retreated in response to rumors of rate hike uncertainty. Attention has now shifted to Friday’s upcoming speech by Federal Reserve chairman, Janet Yellen.

Friday August 26 – Yellen Speech

Yellen plans to speak at the annual meeting of world central bankers in Jackson Hole, Wyoming on Friday. Forex traders and other investors will be closely observing as they listen for clues of whether she shares hawkish views with Fischer and other Fed officials such as William Dudley, or if she has a more dovish stance to match the recent July Fed policy meeting minutes – which showed the FOMC was in no hurry to raise rates; at least at the time.

US Dollar Index – Looking For Clues

The US Dollar Index shows that the Greenback has felt the pressure as it dropped to a 2-month low of 94.08 on Monday, recovering just slightly to Tuesday’s high of 94.55 and has leveled out for now at 94.46 level. What can you learn from watching the US Dollar Index and why does it matter?

The UK Roller Coaster

The UK economy shows its muscles as the recent UK data reveals that the manufacturing sector continues relatively strong despite June’s Brexit vote. According to the CBI survey which questions 505 firms and reported a reading of -5%, represents the variance between the percentage of firms reporting higher than normal orders and the percentage of firms reporting lower than normal orders.

This beat out the predicted 9-10% prediction by most economists and surprisingly, this is the second consecutive month that we have seen better than expected results. That said, the result is still a negative number, which is the 16^th straight month of negative readings.

The survey also revealed export order books of -6%, which although being a negative number, is still a 2-year high as weakness of the sterling has made British products more competitive and desirable.

In the wake of better than expected data, the weakness of the GBP has affected inflation, with inflation expectation at its highest level since 2014 as firms predict raw material imports to be costlier.

The sterling shows resilience but the long term effects of the Brexit vote on the cable still remains to be seen.

Euro Trading Higher

Meanwhile, other surveys are showing that the Eurozone economy is also expanding despite the initial reaction of the Euro to the surprise Brexit vote. For example, the PMI (Purchasing Managers’ Index) shows Eurozone activity to be it’s highest in 7 months. This is a good index to gauge the spending intentions of companies in Europe and as accepted as a good indicator of business activity.

Consequently, the euro edged up to 1.1352, getting close to last week’s high of 1.1362

Although we report positive indications out of the UK and Europe, we are not suggesting a long-term rally in these currencies as we anticipate further testing of previous support and for now there are impending possibilities to trade short term in either direction.

Riding The Forex Roller Coaster

At ForexSignal.com, we are excited to ride the Forex roller coaster of new highs and lows. As we ride along into September, no doubt there will be many Forex signal trading opportunities ahead.