The dollar is down across the board today, giving back a chunk of the gains from after the US PPI data yesterday. EUR/USD is back up by 0.3% to 1.1680, with large option expiries also in play for the pair. Meanwhile, USD/JPY is the most notable mover as it is down 0.6% to be back under the 147.00 level.
USD/JPY 4-hourly chart
The drop in USD/JPY today also owes to traders feeling out odds of a quicker BOJ rate hike after the better-than-expected Japan Q2 GDP data.
Elsewhere, the market moves are more measured with GBP/USD up just 0.1% to 1.3548 and USD/CAD down 0.2% to 1.3793 on the day. Even AUD/USD is only seen up 0.2% to 0.6506 currently.
Overall, it doesn’t reflect all too much appetite but it speaks to dollar sentiment in the bigger picture at the moment. Traders are firmly pressing down on the currency in wanting to push the Fed for a rate cut in September.
But at the same time, that might present a potential floor for the dollar with policymakers having explicitly ruling out a 50 bps move. A 25 bps rate cut is priced in now and that speaks to limited downside for the currency in terms of Fed outlook pricing.
However, there are other concerns for the dollar in the grand scheme of things. Fed independence and BLS credibility are both at stake amid Trump’s political takeover of both institutions and the risks of that should not be undermined.
As for now, traders might have to just stick with more of a push and pull mood until Jackson Hole and then the US jobs report on 5 September.