Dollar Flat as Eventful Week Begins

August 28, 2023
  • Markets are still digesting Fed Chair Powell’s Jackson Hole remarks; Fed speakers this week should relay a similar message; Dallas Fed manufacturing index for August will be the only U.S. data today
  • ECB hawks are getting more vocal; eurozone reported very weak July M3 data
  • Australia reported July retail sales; New Zealand has been forced to tighten fiscal policy

The dollar is trading flat as an eventual week begins. DXY is trading flat near 104.101 after it traded at a new high for this move Friday near 104.309. It remains on track to test the May 31 high near 104.699. The euro is trading flat near $1.0815 after traded at a new low for this move Friday near $1.0765. It remains on track to test the May low near $1.0635. Sterling is trading flat near $1.2580 after it traded at a new low for this move Friday near $1.2560. It remains on track to test the May low near $1.2310. USD/JPY is testing Friday’s high near 146.65 as it probes the upside of its 145-150 trading range. With the BOJ remaining dovish, we look for an eventual test of 150. The fundamental story continues to move in favor of the greenback. Friday’s speech by Powell confirms the Fed’s hawkish stance and we think another hike could be confirmed by U.S. data this week, which is of course dollar positive.


Markets are still digesting Fed Chair Powell’s Jackson Hole remarks. The markets initially took his remarks as dovish but then quickly reversed when the realization came that Powell can’t and won’t promise outright that the Fed will hike again. He stressed that Fed policy is fully data-dependent and right now, the data say the Fed needs to hike again. Jobs report Friday is obviously key as the 2-year interest rate differentials continue to move in the dollar’s favor.

Fed speakers this week should relay a similar message. Barr speaks today and tomorrow. WIRP suggests nearly 25% odds of a hike September 20, up from 10% at the start of last week, with odds rising to nearly 70% November 1 vs. 40% at the start of last week. More importantly, the first cut has been pushed out to June from May at the start of last week.

Dallas Fed manufacturing index for August will be the only U.S. data today. It is expected at -19.0 vs. -20.0 in July. This will be followed by other key surveys. Its services index will be reported tomorrow. Chicago PMI will be reported Thursday and is expected at 44.1 vs. 42.8 in July. ISM manufacturing PMI will be reported Friday and headline is expected at 47.0 vs. 46.4 in July. Keep an eye on prices paid and employment, which stood at 42.6 and 44.4 in July, respectively.


European Central Bank hawks are getting more vocal. After the July meeting, the doves seemed to have the upper hand with growing talk of a pause. Today, Holzmann pushed back as he said “We’re not yet in the clear when it comes to inflation. If there aren’t any big surprises, I see a case for pushing on with rate increases without taking a pause.” Holzmann speaks again later today. So too will noted hawk Nagel, who is likely to take a similarly hawkish stance as Holzmann. ECB tightening expectations remain steady. WIRP suggest odds of a 25 bp hike stand near 45% September 14, rise to 66% October 26 and top out near 75% December 14. These odds will rise and fall with the data but what’s very interesting to us is that the ECB may stop hiking before the Fed does and we don't think the markets have priced this risk in yet.

Eurozone reported very weak July M3 data. It came in at -0.4% y/y vs. 0.0% expected and 0.6% in June. This matches the lows from the financial crisis. With the ECB still hiking rates, shrinking its balance sheet, and letting TLTROS roll off, we expect further weakness to new all-time lows in M3 data in the coming months. Of course, this all but guarantees a recession and the fact that it will be worse than what we saw back in 2009 suggests the downturn will be painful.


Australia reported July retail sales. Sales came in at 0.5% m/m vs. 0.2% expected and -0.8% in June, and were apparently boosted by spending related to the Women’s World Cup as well as school holidays. However, the y/y rate still slowed to 2.1% vs. 2.3% in June and was the slowest since August 2021. Recent data have come in on the soft side as the slowdown in China and RBA tightening hit. July private sector credit will be reported Thursday. WIRP suggests no change is priced in for either the September 5 or October 3 RBA meetings. However, the odds of a hike November 7 then rise and top out at 60%. Bullock speaks tomorrow.

New Zealand has been forced to tighten fiscal policy. Finance Minister Robertson said the government has identified almost NZD4 bln ($2.4 bln) of potential savings over the next four years and noted “We have seen further deterioration in the global economy, particularly in China. This will continue to have a direct impact on the New Zealand economy, and it is important that the government responds to meet our balanced and responsible fiscal goals.” Robertson said the announced measures will help keep net debt under 30% of GDP and move the budget back to surplus by June 2027 vs. June 2026 previously. Robertson and Prime Minister Chris Hipkins are preparing the Treasury’s pre-election fiscal update scheduled for September 12, which is likely to show a slump in revenue that will lead to larger budget deficits. Hence, the pre-emptive moves from Robertson. The news couldn’t have come at a worse time as the ruling Labour Party is struggling to maintain support less than seven weeks from a general election.  

Brown Brothers Harriman & Co. (“BBH”) may be used as a generic term to reference the company as a whole and/or its various subsidiaries generally. This material and any products or services may be issued or provided in multiple jurisdictions by duly authorized and regulated subsidiaries.This material is for general information and reference purposes only and does not constitute legal, tax or investment advice and is not intended as an offer to sell, or a solicitation to buy securities, services or investment products. Any reference to tax matters is not intended to be used, and may not be used, for purposes of avoiding penalties under the U.S. Internal Revenue Code, or other applicable tax regimes, or for promotion, marketing or recommendation to third parties. All information has been obtained from sources believed to be reliable, but accuracy is not guaranteed, and reliance should not be placed on the information presented. This material may not be reproduced, copied or transmitted, or any of the content disclosed to third parties, without the permission of BBH. All trademarks and service marks included are the property of BBH or their respective owners.© Brown Brothers Harriman & Co. 2022. All rights reserved.

As of June 15, 2022 Internet Explorer 11 is not supported by

Important Information for Non-U.S. Residents

You are required to read the following important information, which, in conjunction with the Terms and Conditions, governs your use of this website. Your use of this website and its contents constitute your acceptance of this information and those Terms and Conditions. If you do not agree with this information and the Terms and Conditions, you should immediately cease use of this website. The contents of this website have not been prepared for the benefit of investors outside of the United States. This website is not intended as a solicitation of the purchase or sale of any security or other financial instrument or any investment management services for any investor who resides in a jurisdiction other than the United States1. As a general matter, Brown Brothers Harriman & Co. and its subsidiaries (“BBH”) is not licensed or registered to solicit prospective investors and offer investment advisory services in jurisdictions outside of the United States. The information on this website is not intended to be distributed to, directed at or used by any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. Persons in respect of whom such prohibitions apply must not access the website.  Under certain circumstances, BBH may provide services to investors located outside of the United States in accordance with applicable law. The conditions under which such services may be provided will be analyzed on a case-by-case basis by BBH. BBH will only accept investors from such jurisdictions or countries where it has made a determination that such an arrangement or relationship is permissible under the laws of that jurisdiction or country. The existence of this website is not intended to be a substitute for the type of analysis described above and is not intended as a solicitation of or recommendation to any prospective investor, including those located outside of the United States. Certain BBH products or services may not be available in certain jurisdictions. By choosing to access this website from any location other than the United States, you accept full responsibility for compliance with all local laws. The website contains content that has been obtained from sources that BBH believes to be reliable as of the date presented; however, BBH cannot guarantee the accuracy of such content, assure its completeness, or warrant that such information will not be changed. The content contained herein is current as of the date of issuance and is subject to change without notice. The website’s content does not constitute investment advice and should not be used as the basis for any investment decision. There is no guarantee that any investment objectives, expectations, targets described in this website or the  performance or profitability of any investment will be achieved. You understand that investing in securities and other financial instruments involves risks that may affect the value of the securities and may result in losses, including the potential loss of the principal invested, and you assume and are able to bear all such risks.  In no event shall BBH or any other affiliated party be liable for any direct, incidental, special, consequential, indirect, lost profits, loss of business or data, or punitive damages arising out of your use of this website. By clicking accept, you confirm that you accept  to the above Important Information along with Terms and Conditions.

1BBH sponsors UCITS Funds registered in Luxembourg, in certain jurisdictions. For information on those funds, please see

captcha image

Type in the word seen on the picture

I am a current investor in another jurisdiction