USD Selling Resumes on Quiet August Markets

The USD selloff continues, with the US dollar reaching its lowest point of the day against the Yen, the euro, as well as against commodity currencies. This decline seems like a continuation of the price movement from last week, as the USD was declining early in the week, retraced some of the losses, but then resumed the decline toward the end of the week.

USD DXY Index Chart Daily – Sellers Testing the 102

Market Reactions Post US Retail Sales

Following last week’s rally, driven by strong retail sales and positive comments from Walmart, the dollar has been steadily losing ground. This lack of momentum, even with good news, is concerning for dollar bulls. The hesitancy in the market could stem from an incident in early August that rattled traders, suggesting deeper issues as high Federal Reserve rates continue to impact borrowing conditions.

US Elections Uncertainty and Market Sentiment

Election-related anxieties are also playing a role, with many market participants sitting on significant year-to-date gains and opting for caution. High-interest rates seem to be achieving their intended effect, slowing the economy. Even if rates begin to decrease gradually, the impact of these high rates will continue to weigh on the economy, which is expected to slow down further.

Calm Forex Market Conditions

Given that it’s August and the market is experiencing a quiet week, not every movement can be easily explained. Earlier today, we heard from FED policy member Christopher Waller at the 2024 Summer Workshop on Money, Banking, Payments, and Finance in Washington, D.C. However, he did not provide any insights into the state of the economy or the FED’s future monetary policy, leaving the market without clues about the anticipated September rate cut.