FXTM information and reviews
IronFX information and reviews
Libertex information and reviews
FXCC information and reviews
Markets.com information and reviews
FxPro information and reviews
42 567.79

Fed shockwaves reverberate

31 August 2021

The party in US stock markets continues to rage. The S&P 500 and the Nasdaq hit new milestones yesterday, with tech heavyweights being at the tip of the spear after the Fed chief reassured investors that the cheap money punchbowl won’t be taken away immediately. With the Fed playing it slow and Congress set to unleash another multi-trillion spending spree to power up growth at a time when the US economic engine is already revving, the stars have really aligned for equity markets. Best of all, it seems like any corporate tax hikes will be watered down significantly as industry lobbies chip away at the massive reconciliation bill.  

Wall Street hits fresh records

The main worry is the Delta outbreak, but as we’ve seen time and again, markets rarely bleed because of virus developments. If anything, an escalation of the outbreak could fuel hopes for an even more patient Fed and put additional pressure on the politicians to step up their spending game. Virus worries are essentially a self-correcting dynamic for stocks, especially in the tech sector.    

Dollar bleeds, commodity FX capitalizes

Over in the FX arena, the US dollar continues to bleed as markets price in lower chances for a September taper announcement by the Fed. The good news for dollar bulls is that this is a case of tapering being delayed, not derailed. Hence why the retreat in the greenback has been minor. 

Markets are now trading on whether the Fed will signal tapering in September and start the process in November, or whether it will be pre-announced in November and implemented in December. The next edition of nonfarm payrolls this week will go a long way in settling this debate, but in the big picture, it doesn’t matter much. It’s only a matter of time. 

Capitalizing the most on the dollar’s latest troubles have been the usual commodity FX suspects. The kiwi in particular has enjoyed a very sharp rebound as markets turn more confident that New Zealand will defeat the virus once again, allowing the RBNZ to initiate its rate hike cycle.  

China slowdown, euro inflation

What’s especially striking about the recovery in commodity-linked currencies is that it is taking place despite signs that China is slowing down. The nation’s PMI surveys for August confirmed that growth is losing momentum, with the composite index crossing below the crucial threshold of 50. 

This raises all kinds of questions. How long can foreign stocks and currencies of nations that rely on China’s endless commodity demand stay cheerful if the economy is losing strength? Will Chinese authorities respond with an avalanche of stimulus or will they take a more measured approach, in fear of an already over-leveraged private sector?

Making matters worse, Beijing continues its regulatory crusade. This time regulators are going after private equity firms and are also limiting the access of minors to online gaming. The issue here is the timing of all the recent changes - structural reforms into a slowing economy rarely pay off. 

As for today, we get the latest Eurozone inflation stats and growth numbers from Canada. There’s growing chatter the ECB could also dial back its asset purchases in September. Even in this case though, it would be almost a ‘fake taper’, with the ECB slowing its emergency pandemic purchases only to increase its regular purchases later on. Rates won’t rise for several years, which is ultimately what matters for FX markets.

By XM.com


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
HotForex information and reviews
XM information and reviews
FXCM information and reviews
Vantage FX information and reviews
Vantage FX
Moneta Markets information and reviews
Moneta Markets

© 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.