USD: Looking cheap – ING

The dollar didn’t suffer in the first half of July from trade tensions re-escalating. And it is equally finding no benefit from positive trade deal news. As a potential blockbuster deal with the EU may be announced in the coming days after yesterday’s US-Japan agreement, the dollar impact may also prove to be mostly neutral, ING's FX analyst Francesco Pesole notes.

Markets still price in 16bp of easing for September

"If the greenback is indeed due a short-term recovery (we still think it is), then that will need to be triggered by data rather than tariff news, in line with the recent rise in most USD crosses’ sensitivity to short-term rate differentials."

"But this week has been quiet on data, and that has seemingly allowed some rebuilding of USD shorts. Today’s calendar is more crowded, with focus on new home sales (yesterday’s existing home sales came in soft), S&P Global PMIs and above all jobless claims. Initial claims have been on a five-week downward trend and continuing claims have plateaued since mid-June. With only eight days until the US jobs report, another strong print today can drive NFP expectations a bit higher. The whisper number is currently 110k."

"Markets still price in 16bp of easing for September, which is the contract where we see the greatest potential for a hawkish repricing driving some dollar recovery."