Rate hike odds higher after Jackson Hole

Jerome Powell disappoints

Federal Reserve Chairman Jerome Powell disappointed traders and investors at the end of last week, as he did not give any hints of a pause. In fact, he kept the door open for more hikes.

The Fed Fund Futures is now pricing in 21% of a 25bps rate hike in September, while November’s probability is now at 65%. However, markets were able to digest his remarks as there was nothing new or different from the recent FOMC meeting, shifting their focus back to the upcoming economic releases.

This week, all eyes will be on GDP, the Core PCE Price Index, and the jobs report, which might give traders and investors more clues on whether the Federal Reserve will be able to do another rate hike before the end of the year.

De-dollarization is not working

An international movement against the dollar’s global dominance, spearheaded by nations including China and Russia, has suffered from a setback, with the greenback’s share of worldwide payments hitting a record high.

Data from the Society for Worldwide Interbank Financial Telecommunication, also known as SWIFT, showed an unprecedented 46% of foreign exchange payments via the communications system involving the US dollar in July, per Bloomberg.

The jump in dollar-based SWIFT payments raises challenges to the movement to end the greenback’s supremacy over global payments and fund transfers.

China announces new measures to boost the market

In a new effort to boost the market, China announced new measures right before the market open, including a reduction of the stamp duty on stock trades and a slower pace of initial public offering.

However, Chinese stocks pared most of their early gains on Monday, showing once again that these efforts are falling flat in the face of economic worries.

After opening 5.5% higher, the CSI 100 Index of mainland stocks pared its advance to about 1.4% until this report is released, while foreign funds accelerated their selling through the day, poised to take this month’s outflows to the biggest on record.

DXY remains at key resistance

The US Dollar Index managed to break above the 104.0 resistance area last week and tested another key resistance area at 104.40, which stalled at the end of the week. Technical indicators are heavily overbought, which keeps the bearish outlook. The upcoming days might give us more evidence about the Federal Reserve’s upcoming decisions, which might have a major impact on the dollar.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial

Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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