GDP Proves to be Non-Event; Awaiting Yellen at 10 am

USD

As with much of this month, the U.S. dollar traded in quiet ranges again overnight.  However, volatility is expected to jump sharply this morning as a plethora of risk events are on today’s schedule.

This morning’s data has not provided the catalyst just yet.  The U.S. economy expanded at a 1.1% quarter of quarter rate in the second quarter, right in line with expectations.  The print is a slight decline from an initial reading of 1.2%, according to the Commerce Department. Personal consumption rose 4.4%, beating expectations of a 4.2% jump but has done little to spark a dollar rally.

At 10 a.m. EST, Federal Reserve Chair Janet Yellen is scheduled to speak in Jackson Hole, WY.  Her speech is titled “The Federal Reserve’s Monetary Policy Toolkit.”  Traders see this as an opportunity for the central bank head to provide guidance on the Fed’s monetary policy plan moving into the second half of the year.  Odds that the Fed will raise rates this year have risen to 57% from below 50% early last week as other monetary policy officials have signaled the economy is strong enough to withstand higher borrowing costs.  However, some have warned that Yellen may just discuss the arrows still in her quiver, and not necessarily that she has decided to use them.

EUR

The Euro was unchanged against the U.S. dollar but remains near the top of recent ranges.  However, the EUR/USD has held a 50 pip range for the duration of the week. The pair has been sluggish over the month as much of Europe is closed for the summer holiday season.  Some have pointed to today’s speech by Janet Yellen as the end of the summer season, so we may see volatility pick up moving forward.

The European economic docket showed that consumer confidence in Germany and France registered slightly better than expected and Spanish retail sales ticked higher.

GBP

The British pound looks to finish off the week strong. The currency has gained against all of its 31 major peers this week and is set for its biggest weekly gain in a month versus the Euro.  The sterling has benefited from a long string of strong economic data, beating expectations of a Brexit slump.

Today’s data adds to the narrative.  U.K. consumer confidence rose the month in more than three years this month.  The index of consumer sentiment by YouGov jumped to 109.8 from 106.6 in July, which was a three year low.  The impressive print follows strong retail sales and unemployment benefit claims last week.