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According to Chris Turner – Global Head of Strategy and Head of EMEA and LATAM Research at ING, Friday’s better than expected US jobs data has cemented the view that a 25 basis point cut will be sufficient insurance from the Federal Reserve at its 31 July meeting.  

Key Quotes:

“This will have disappointed some in the market looking for a more aggressive move and has served to flatten the US 2-10 year yield curve by close to 15bp over the last fortnight. This leaves risk assets feeling slightly short-changed and open to pockets of vulnerability. Beyond US-China trade, attention has now turned to trade tensions between Japan and Korea, where Japan has imposed restrictions on semiconductor exports to Korea, citing national security concerns – sounds familiar. Korea’s Kosdaq is down 3% and it will be worth watching the performance of the US Sox semiconductor index today, in case any US names are caught up in supply chain issues.”

“Expect the dollar to consolidate further this week, with the next big input coming on Wednesday, when Fed Chair Jay Powell testifies to the House and FOMC minutes are released. DXY may struggle to get past 97.70 resistance, though.”