Quarterly Outlook
Q3 Investor Outlook: Beyond American shores – why diversification is your strongest ally
Jacob Falkencrone
Global Head of Investment Strategy
Access all our platforms from a single account.
Powell slightly hawkish while BoJ churns the JPY.
John J. Hardy
Global Head of Macro Strategy
Summary: Positive ADP private payrolls data for July and a slightly hawkish Fed Chair Powell presser boosted the US dollar, while the Bank of Japan meeting churned the JPY with raised inflation forecasts but a wait-and-see approach from Ueda on tariff impacts.
ADP data and Powell Presser boost the US dollar.
The greenback got a further boost yesterday on a firmer than expected ADP numbers (104k rise versus +75 expected and a +10 revision to the prior month’s data) and on the more hawkish than anticipated Fed Chair Powell press conference. That came after the first dissent by two dovish dissents to the Fed’s decision to stand pat on rates, the first time since the early 90’s that two on the Board of Governors (Waller and Bowman) dissented. In the presser, Powell once again generally refused to provide firm guidance of any sort, resulting in a hawkish lean as he wants more data “in the coming months” before deciding what to do, forcing the market to price lower odds of September cut. Powell leaned on the unemployment rate as key (i.e, we should infer that inflation developments are less likely to spark Fed moves, while clear labor market deterioration would get the Fed moving in a hurry).
Bowman and Waller, both likely hoping to get Trump’s attention in the nomination process, will likely be forthcoming with their reasons for dissenting, though Waller was already dovish previously.
Chart: USDJPY
The Bank of Japan meeting overnight sparked a JPY rally as the Bank of Japan issued a new set of inflation forecasts that raised eyebrows, including raising the forecast for core inflation through the end-March 2026 fiscal year to 2.7% from 2.2% previously. But Japanese short yields failed to react in response and the Governor Ueda press conference delivered a nothingburger as he touted the need to monitor the impact of the tariffs in the “hard data” before making any decisions. With the burst higher in two Mag7 names after the US market close yesterday (Meta and Microsoft), a nominally hawkish Fed and nothing from the BoJ, the JPY is under broad pressure from a carry trading angle. For the JPY to make a comeback, we probably need weaker risk sentiment and lower yields. Resistance was found at the 200-day moving average overnight, and this is under siege after the BoJ non-event as I write. Should 150.00 fail to contain the rally, the next level higher might be the 61.8% retracement level up at 151.62.
Looking ahead
The decisive factors for market direction through the end of this week and beyond will be:
- Risk sentiment from the equity market after the stunning leap in the two giga-caps Meta and Microsoft yesterday after reporting strong earnings. Two more of the Mag7, Amazon and Apple, report after the close today. reporting today)
- The US jobs report on Friday. After the ADP and the positive surprise last month, the best test for market direction that developed this week would be a surprisingly weak number.
Trump chickened out on the upcoming 50% copper tariff threat yesterday by exempting refined copper (which is what is chiefly traded/desired) and this crushed US copper prices, triggering the biggest single day slide ever of some 20%. On the other hand, Trump is making good on the “secondary tariff” front on those importing Russian oil as he slapped a 25% tariff on India and threatened more for its oil and weapons imports from Russia and its high barriers to trade. South Korea agree the standard 15% (including on cars) and no retaliation deal, with a USD 350 billion investment into the US, including for energy and shipbuilding.
Let’s not forget that it is the last day of the month, often meaning choppy market moves. Today should see a scramble to get the final trade deals with the US in place.
FX Board of G10 and CNH trend evolution and strength.
Note: If unfamiliar with the FX board, please see a video tutorial for understanding and using the FX Board.
The USD trend has turned positive, but let’s keep in mind that this is a short-medium term measure, as the USD is still in a negative super-trend not reflected in these readings. Elsewhere, the late Euro strength has now been completely neutralized – will be looking for support in places soon (EURUSD ahead of 1.1200 and EURGBP already here).
Table: NEW FX Board Trend Scoreboard for individual pairs. The EURUSD and AUDUSD are in their first day of a new downtrend with this latest move higher in the USD. USDCHF is the final USD pair yet to trigger a positive uptrend for the USD, the shading indicating it will flip positive today if current levels hold (after 118 days in a downtrend, from above 0.9000 to well below 0.8000 at the early July lows!)
This content is marketing material and should not be regarded as investment advice. Trading financial instruments carries risks and historic performance is not a guarantee of future results.
The instrument(s) referenced in this content may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and options..
The instrument(s) referenced in this content may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and options..
Latest Market Insights
Quarterly Outlook
-
-
Quarterly Outlook
Q3 Macro Outlook: Less chaos, and hopefully a bit more clarity
John J. Hardy
Global Head of Macro Strategy
After the chaos of Q2, the quarter ahead should get a bit more clarity on how Trump 2.0 is impacting... -
Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
-
Quarterly Outlook
Commodity Outlook: Commodities rally despite global uncertainty
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
Upending the global order at blinding speed
John J. Hardy
Global Head of Macro Strategy
We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ... -
Quarterly Outlook
Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever
Jacob Falkencrone
Global Head of Investment Strategy
-
Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Global Head of Macro Strategy
-
Quarterly Outlook
Equity Outlook: The ride just got rougher
Charu Chanana
Chief Investment Strategist
-
Quarterly Outlook
China Outlook: The choice between retaliation or de-escalation
Charu Chanana
Chief Investment Strategist
-
Quarterly Outlook
Commodity Outlook: A bumpy road ahead calls for diversification
Ole Hansen
Head of Commodity Strategy