US FX WRAP: Dollar rangebound ahead of FOMC Minutes
The Dollar Index saw marginal gains on Tuesday, albeit in holiday thin trade amid a lack of tier 1 US data and Fed speak. The Greenback lacks direction due to headline catalysts being light as desks await the next risk event. Attention continues to remain on US Treasury yields, which remain elevated and are weighing on sentiment. Ahead, the FOMC Minutes are due on Wednesday and attention is on how hawkish (or not) they will be, while Fed pricing was little changed ahead of the September confab as a hold currently seems most likely based on recent data, albeit there is still more to come.
G10 FX was lower across the board to varying degrees against the Dollar in pretty thin headline newsflow. Antipodeans were the underperformers, and likely hit on risk, with the EUR the relative outperformer, albeit still flat. For the single-currency, ECB's Chief Economist Lane said that EZ inflation being one percentage point above the ECB's 2% target is a lot.
Elsewhere, Cable saw a slight knee-jerk higher following the UK jobs report, and likely on the earnings metrics, although this proved shortlived as the Unemployment Rate remained sticky vs expectations of a downtick.
Looking at the Loonie, it saw very modest weakness as a White House Official confirmed leaders of the US and Canada spoke last night and that "no resolution that would prompt the US President to hold off on the retaliation tariffs which are set for August 19th". Despite this, there were conflicting later reports that a deal between the US and Canada to stave off new tariffs on Canadian goods is now on President Trump's desk, and it is now up to Trump whether the 50% duty goes into effect, as scheduled, at midnight.
Session wraps of this kind describe the standard pre-event stasis: thin liquidity, no tier one data, and positioning frozen ahead of a release that rarely delivers the surprise its anticipation implies. FOMC minutes have historically been a low-yield catalyst, since they restate a decision already digested and the individual remarks of officials in the intervening weeks tend to carry more marginal information than the committee record; the episodes where minutes have repriced the front end are those where they reveal a breadth of dissent or a debate over balance sheet and reaction function that the statement had smoothed over. The cable knee-jerk that faded on a sticky unemployment print is a familiar sequence: earnings strength draws the first bid, the labour slack metric decides whether it holds, and central banks watching wage persistence have tended to weight the stickiness over the headline. On the loonie, the pattern in past tariff-deadline episodes has been whipsaw on conflicting headlines into the deadline itself, with the binary outcome concentrated at the moment of decision rather than in the run-up, which leaves crosses exposed to gap risk on either resolution. The follow-ons worth noting are whether the minutes shift the hawkish framing enough to move front-end pricing from its current hold skew, and the tariff deadline as the hard calendar point for CAD. Elevated Treasury yields remain the underlying transmission channel, weighing on risk appetite and by extension the high-beta antipodeans that underperformed here.