FX Talk

From the FXWW Chatroom: RBC…USD is still consolidating Friday’s gains,with a Fed hike now ~40% priced for September and 80% by year-end. The Fed’s Fischer is a last-minute addition to the calendar today. He will give an interview to Bloomberg TV at 11.30am BST/6.30am ET. It bears watching, as it was Fischer’s comments that moved markets most on Friday, building up expectations for that 2016 hike. It is also month-end tomorrow, but US equities are up just 0.3% on the month, which means no currency-hedging signal. That may allow USD to further consolidate its gains. Recall that last month equities were up over 3%, our month-end hedging model was max short USD, and sure enough, USD was a big underperformer on the last day of July. Our Risk Thermometer jumped toward risk aversion last week as both equity and FX vol popped higher, although it remains in outright risk-seeking territory.

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