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September Fed hike in balance

The US dollar rallied initially following last Friday’s nonfarm payroll even though it was a little below expectations at 215k, the average hourly earnings data was good enough to impress on the dollar bulls and push the greenback higher. Treasury yields also edged higher with the 2 year hovering around a four year high which, if the US data continues to impress, could be broken in a move towards the 0.8000% level. Last week’s dollar strength was assisted by comments from Fed voting member Dennis Lockhart who has been pushing for a hike throughout this year and his strongest suggestion yet that September will mark the commencement of the Fed’s monetary tightening. He makes two formal speeches today one at 14:00, the other 17:25 UK time and this could give further impetus to the dollar.

However, the consensus remains split over a September hike and the dollar’s rally continues to fail at recent highs. As ever the data between now and when the Fed next meets on 17th September remains key, especially next month’s nonfarm, but this week sees retail sales on Thursday and industrial production on Friday, so all in all a relatively quiet week. Today is also quiet on the economic data front so Lockhart’s speeches could prove big market movers.

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