Stress cooling down!
Finally, yesterday we heard Mr. Powell`s speech, and as we were expecting, again he emphasized that we should not worry about inflation, as we have many tools to use and control if needed. He mentioned that the FED would patiently continue to do whatever takes and needs to support the Labor market until we get back to normal. There is enough evidence of actual inflation or other imbalances. Mr. Powell sail "We will not raise interest rates pre-emptively because we fear the possible onset of inflation. "We have unstable employment and higher inflation, "... "We will not just look at the headline numbers for unemployment."
The market positively reacted to Mr. Powell Speech, New York Fed President John Williams, and Cleveland Fed President Loretta Mester. USD was a bit weaker, and leading Wall Street indices closed higher. John Williams, about Interest rates, said that raising policy is still "way off in the future," and Loretta Mester noted improvement in the labor market is the priority to start a discussion the asset tapering. And recent FOMC members` comments mean that the Fed will pay more attention to changes in data details. For example, while the central bank pays attention to the unemployment rate in the labor market, it considers other specific factors such as changes in employment of various groups and races, labor force participation rates, etc. In this regard, Mr. Powell said they might also consider other similar tools such as a compensation plan (PPP) if needed. While the FED governor optimistic about the labor market, he still believes that "there is still a long way to go before recovery."
On Covid-19 Front, the Delta variant is still in the spotlight and gets the attention. Due to its more robust transmission and being resilient some vaccines, and the recent slowdown in the rate of vaccination in some states of United States, local experts have issued a warning that the U.S.A may cause a new wave of pandemic outbreaks in the fall. Among them, the number of hospitalizations in counties with low vaccination coverage may multiply.
Overall, market sentiment is positive in stock markets as investors are getting more confidence that central banks are still there to support. We should not be as favorable to faster recovery as we used to be a month ago.
FX Market:
USD Index: US dollar index continued its decline under 92.00. Same for U.S. bond yields, also we can see the downtrend is getting more attention. The 10-year bond yields fell moderately by two basis points to 1.48%.
Euro: After an earlier fall to 1.19, ahead of European PMI data, it shows some stronger signal.
GBP: Same as Euro, and after USD weakening, Pound rebounded 0.6% against the US dollar from its daily low to 1.3950. Some reports show that the United Kingdom is planning to join the Trans-Pacific Trade Agreement (TPP) agreement. In that case, the UK and 11 other member states are expected to cancel 95% of tariffs on goods and services. Among the trade dispute between the UK and Europe on the Northern Ireland border, this news can be positive for Sterling.
Yen: Earlier today, BoJ meeting minute published, and then we as a bit decline in both Mnufacyoring and Service PMI in Japan. After these data, Yen continued to rebound to 110.90, a 0.25% daily gain.
NZD: Closed 0.8% higher, but declined earlier under 0.7000, currently trading at 0.5015
AUD: Closed 0.7% higher. Despite earlier fall, it is still trading higher in intraday charts.
CAD: Canadian dollar was under pressure and recorded a decline of about 100 points, closed at 1.2304.
Commodities:
Gold: The yellow metal gave up some of its gains slightly to $1,773 yesterday, but started to gain over weaker USD, currently trading higher in intraday charts at $1,782.
Silver: Same as Gold, after yesterday`s decline, it is trading 0.7% higher, a shy under $26.
Crude Oil: US crude oil closed slightly higher at 72.80 US dollars per barrel. Today also kept its uptrend over $73.
