The US dollar had a strong start to the new week, reversing some of the massive losses it suffered in the previous week. EUR/USD dropped under 120, USD/JPY settled above 109 and the recovering pound also halted.
What is behind this move? It is not defiance on September 11th, but rather other reasons.
- Irma could have been worse: Florida was preparing for Hurricane Irma for long and tense days. The huge and devastating storm hit the Sunshine State, but the worst case scenarios were avoided. The storm hit the west coast and not the eastern one and weakened as time passed by. The Florida Keys and quite a few islands in the Caribbean were hit quite hard. Nevertheless, the fear about Irma, especially after the damage from Harvey, did not fully materialize.
- North Korea nerves calm: In recent weeks and months, the tensions around the rogue nation escalated in words and actions. The latest test nuclear test was claimed to be an H-bomb and threats were flying all over. On the nation’s national day, September 9th, there was fear that another deterioration could occur. The day, over the weekend, passed without any disaster. This also contributed to a relief rally.
- Profit taking: What goes down, must also come up. Foreign exchange is never a one-way street. Even in the strongest of trends, we see some bounces. This is more than a “dead cat bounce”, but not a change of course, at least not yet.