FXTM information and reviews
FXTM
93%
IronFX information and reviews
IronFX
92%
Libertex information and reviews
Libertex
91%
FXCC information and reviews
FXCC
90%
Markets.com information and reviews
Markets.com
89%
FxPro information and reviews
FxPro
88%
EUR/USD
1.1730
BTC/USD
42 294.79
GBP/USD
1.3634
USD/JPY
109.5085
USD/CHF
0.9226
USD/CAD
1.2791
EUR/JPY
128.4589

Dollar shines after Clarida, BoE in the spotlight


5 August 2021

It was a wild session in financial markets. The dollar took a hit early on after the ADP jobs report disappointed, only to stage a massive comeback after the Fed’s vice chief talked about rate increases and the ISM services survey hit a new record high.  The Fed’s second in command - Richard Clarida - said that the conditions for raising interest rates could be met by late 2022. He also stressed that the economy has made progress towards the goals required for tapering asset purchases, foreshadowing a potential announcement in the coming months. 

Make no mistake, Clarida’s views are tremendously important. He is both a member of the Fed’s inner core and a true centrist, so when he throws his weight behind something, that is typically the consensus view within the FOMC. Indeed, the San Francisco Fed president soon echoed his remarks. 

As for the dollar, this is great news. The Fed is slowly but surely setting the stage for dialing back stimulus. For now, everything hangs on tomorrow’s nonfarm payrolls. The labor market needs to come back in spectacular fashion for the Fed to take the next step soon. 

But in the bigger picture, it doesn’t really matter whether tapering is announced in September or December. What matters is that the Fed is years ahead of the ECB and the BoJ in the normalization game. Ultimately, this argues for a stronger dollar against the euro and the yen. That said, for real US yields to recover from depressed levels and the dollar to shine, actual tapering might be needed, not just talk. 

BoE neutral, with a touch of optimism

The main event today will be the Bank of England decision. The UK economy is humming along nicely and a couple of BoE officials have recently called for withdrawing some stimulus, but it is probably too early for that. Most policymakers don’t share this view. They believe that withdrawing stimulus too early would be an even bigger risk as it could hamstring the recovery, especially now that the government is also phasing out its jobs programs. 

The reaction in sterling today will depend on the votes around QE and the updated economic forecasts. The most likely conclusion is a 6-2 split vote, where most members favor keeping their asset purchase program intact but Saunders and Ramsden dissent, calling for an immediate end. 

Coupled with some rosy macroeconomic forecasts, that might be enough to lift the pound. When two members vote for an immediate withdrawal of stimulus, it shows which way the wind is blowing. Otherwise, if the vote is 7-1, the pound could slide. 

Meme stocks, gold, and oil

Meanwhile, the meme stock madness has returned for another round. This time it was Robinhood, whose stock soared 50% yesterday. This was the first day when options on the stock traded. Massively skewed towards calls. Just another reminder that options drive stock markets these days. 

In the commodity sphere, gold went for a rollercoaster ride. Bullion soared initially as the ADP report disappointed and the dollar got hammered, before surrendering those gains once Clarida spoke. The fundamental picture doesn’t seem attractive with the Fed preparing to take its foot off the accelerator, something also endorsed by the chart, which is ready to post a ‘death cross’. 

Finally, oil prices took another beating yesterday after a surprising build in US crude inventories compounded fears over a slowdown in demand, as the Delta variant threatens to kneecap consumption in developing economies. 

By XM.com
#source

Related

Trading the BoE and FOMC meetings
Trading the BoE and FOMC meetings

The FOMC and the BoE meeting are firmly in our sights now, and positions and exposures will need to be managed accordingly. Certainly, the FOMC meeting could...

22 Sep 2021

Stocks bounce back after Evergrande panic
Stocks bounce back after Evergrande panic

As investors increasingly liken the Evergrande crisis with the collapse of the Lehman Brothers in 2008, they remain in the dark about the Chinese government's intentions...

21 Sep 2021

Oil Was Put on Hold
Oil Was Put on Hold

The oil price is falling after rallying before. Early in another September week, Brent is trading at $74.50 and has a lot of room to correct. The strong greenback...

20 Sep 2021

Dollar starts Fed week on front foot, stocks hit by Evergrande fallout
Dollar starts Fed week on front foot, stocks hit by Evergrande fallout

Fears of global contagion from the worsening crisis in China's property sector continued to weigh heavily on sentiment at the start of trading on Monday as markets...

20 Sep 2021

Dollar jumps, gold slumps, stocks nervous
Dollar jumps, gold slumps, stocks nervous

Worries that the US consumer is rolling over were dealt a major blow yesterday after the nation’s retail sales for August overpowered some gloomy forecasts. The retail sales...

17 Sep 2021

Energy is the play: how we get to $100 crude
Energy is the play: how we get to $100 crude

Natural gas futures in Europe and the UK are flying, while our natural gas (NG) CFD (the underlying is traded on the NYMEX) pushed over $5.60 and into 7-year highs...

16 Sep 2021


Forex Forecasts

OctaFX information and reviews
OctaFX
86%
HotForex information and reviews
HotForex
85%
XM information and reviews
XM
80%
FXCM information and reviews
FXCM
79%
Vantage FX information and reviews
Vantage FX
78%
Moneta Markets information and reviews
Moneta Markets
77%

© 2006-2021 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.