FXTM information and reviews
OctaFX information and reviews
FXCC information and reviews
Libertex information and reviews
FxPro information and reviews
HotForex information and reviews

Dollar takes some damage after soft data, gold smiles

16 August 2021

Currency markets closed with a bang last week after an American survey showed consumer sentiment cratering in August to reach its lowest level in a decade. The stunning loss in consumer confidence raised questions about the economy’s fortunes, and consequently about whether the Fed will be able to take its foot off the accelerator soon. 

That dealt a heavy blow to the greenback, which fell in tandem with US Treasury yields. Capitalizing the most on the dollar’s troubles was the Japanese yen, which is very sensitive to changes in interest rate differentials and shines whenever foreign yields fall. 

Dollar grapples with consumer uncertainty

The question now is whether this foreshadows a sharp cooldown in consumer spending that hammers growth, or whether it is just survey ‘noise’ that won't really translate into hard data. As such, this elevates the importance of tomorrow’s edition of US retail sales, which will provide the next clue in this debate. 

For now, this isn’t enough to derail the grand narrative that the Fed will dial back its asset purchases soon. The US economy is firing on most cylinders and Congress is working on another multi-trillion spending package. Whether tapering is announced in September or November ultimately doesn’t matter much. What matters for the dollar is that the Fed is years ahead of the ECB and the BoJ in the normalization game. 

China slows down, sapping sentiment

The Chinese economy is losing momentum. Industrial production, retail sales, and fixed asset investment all slowed very sharply in July as fresh virus restrictions and extreme weather events came together to suppress growth. The disappointing report took the wind out of riskier assets early on Monday. Stock markets in Asia and Europe were a sea of red, although the losses were not very dramatic and there wasn’t any sense of panic. Wall Street didn’t escape unscathed either, with futures pointing to a slightly negative open today. 

In the FX arena, it was the Australian dollar that got hit the hardest. The past few weeks have been a perfect storm for the aussie, which had to suffer strict domestic lockdowns to battle the Delta variant as iron ore prices crumbled and China started to slow down. 

Oil focuses on China, gold breathes again

The debacle in Afghanistan has attracted a lot of attention lately but there has been no visible market impact. Oil prices are instead trading lower on Monday as fears around a slowdown in Asian demand overpowered hopes for supply disruptions in case the instability in Afghanistan spreads beyond its borders. 

It’s not just China either. Japanese growth data just showed that the world’s third-largest economy had a solid second quarter and avoided a double-dip recession, but that optimism was quickly tempered by soaring covid infections. This wave has been Japan’s biggest by far, raising the chances for even tighter social restrictions. 

Meanwhile, gold prices have staged a heroic comeback lately. The yellow metal erased the ‘mini flash crash’ to close higher overall last week, drawing power from the sudden retreat in the dollar and real yields. That’s quite impressive as it shows that dip buyers are still there, just waiting for more attractive prices. 

The bull case for gold is that Congress is about to unleash more fiscal firepower and the Delta outbreak could delay the Fed from normalizing. That said, the bear case looks even stronger. Real rates are just a shade away from record lows and yet gold hasn’t been able to shine much. If real yields recover alongside the dollar as the Fed moves to taper, emboldened by more fiscal spending, it could get ugly for bullion. 

By XM.com



Stock Futures Recover Losses, Here Is Why
Stock Futures Recover Losses, Here Is Why

The US and European futures are trading higher today as most of the stock indices are sending an oversold signal, which has brought some bargain hunters into the market...

21 Jan 2022

Oil prices rocketing
Oil prices rocketing

An outage on a pipeline from Iraq to Turkey has supported the recent increase in oil prices. Turkey’s pipeline operator said it extinguished the flames following...

20 Jan 2022

Signs of slowing UK inflation
Signs of slowing UK inflation

Consumer inflation in Britain continues to accelerate, but producer prices show the first signs of cooling. CPI rose to 5.4 y/y in December, with a 0.5% monthly increase after...

20 Jan 2022

American and European futures are trading lower today
American and European futures are trading lower today

The tone set by the US banks on Friday has created pessimism among traders and this is influencing the price action in the US and Europe. Moving forward...

19 Jan 2022

Metaverse: The next chapter for investing or a temporary hype?
Metaverse: The next chapter for investing or a temporary hype?

2021 saw plenty of innovations come to the mainstream, but the metaverse indisputably hit the home run. Originally coined by Neal Stephenson in his 1992 sci-fi novel Snow Crash...

18 Jan 2022

Fed Hawkish Policy Leads to Slip of Asian Shares
Fed Hawkish Policy Leads to Slip of Asian Shares

On Friday, Asian stocks plummeted as a new round of hawkish statements from Federal Reserve officials bolstered predictions that interest rates in the United States...

17 Jan 2022

Editors' Picks

XM information and reviews
FXCM information and reviews
AvaTrade information and reviews
LegacyFX information and reviews
FP Markets information and reviews
FP Markets
Pepperstone information and reviews

© 2006-2022 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.