The third quarter kicks off today and with the first half of 2017 now in the books, it’s already been quite the eventful year. While the reflation trade bubbled with hope as we turned into 2017, a vicious reversal in the U.S. Dollar through the first six months leaves many major currency pairs in rather precarious positions. The Euro has begun to show signs of strength as investors attempt to get-ahead of the European Central bank for an eventual exit from their gargantuan stimulus program; and more recently, we’ve started to see the British Pound take on some bullish tendencies as it appears that the Bank of England might be getting closer to an actual interest rate hike.

The U.S. Dollar

The Greenback will likely be the center of the FX Universe this week, as the two biggest items on the calendar are USD-related with Wednesday’s release of FOMC minutes and Friday’s print of Non-Farm Payrolls for the month of June.

A Rough 2017 for USD, Thus Far

The U.S. Dollar just finished its worst quarter in seven years. Much of 2017 has seen the Greenback spiraling lower within a bearish channel, and near the end of last quarter – we saw the Dollar fall below a key support level of 95.86, which is the 50% marker of the 16-year move in DXY. Making matters more confusing for traders is the fact that the Federal Reserve has remained rather hawkish throughout 2017, as we’ve now seen three rate hikes in the past seven months and the Fed has said that they want four more out to the end of next year.

But trading FX isn’t about directly trading interest rates – it’s around expectations for changes in interest rates; and expectations for inflation and higher rates have been moving-up even-faster in Europe and the U.K., and this has left the Dollar offered for much of 2017, thus far. The Greenback will likely be the center of the FX Universe this week, economic data has been slowing out of the U.S., and this has further helped to stomp the brakes for USD price action.