What will Fed say to new market records?
American markets are growing and setting new records. The S&P500 updated historical highs, and on Wednesday morning, futures for the index reached new highs.
Nasdaq100 has set 18 historical highs since the beginning of June, as the IT giants included in it mostly benefited from the lockdown.
IT had the highest weight in the indices. The retail and housing sectors had been reliable indicators of economic cycles for years, however, now their signals are harder to read than before. Therefore, it would not be correct to assess the entire economy by individual names and sectors only.
In light of the success for some sectors and the financial market as a whole, it becomes more of a dilemma how the Fed regards this situation. The minutes of the July meeting is expected to be published today
American markets are growing and setting new records. The S&P500 updated historical highs, and on Wednesday morning, futures for the index reached new highs.
Nasdaq100 has set 18 historical highs since the beginning of June, as the IT giants included in it mostly benefited from the lockdown.
IT had the highest weight in the indices. The retail and housing sectors had been reliable indicators of economic cycles for years, however, now their signals are harder to read than before. Therefore, it would not be correct to assess the entire economy by individual names and sectors only.
In light of the success for some sectors and the financial market as a whole, it becomes more of a dilemma how the Fed regards this situation. The minutes of the July meeting is expected to be published today
Prudent currency market gives the dollar a break
It is easy to get confused with the current stock market signals, which renews highs in the ashes of a ruined GDP. The foreign exchange market behaves much more reasonably in this context. Moreover, it is easy to notice the increasing influence of fundamental factors on the dynamics of rates.
In previous months, the US dollar tanked against a wide range of European currencies, due to the United States experiencing an increase in the number of daily new COVID cases, while Europe was relaxing its restrictions.
Improved performance in the US could bring back some of the faith in the dollar. Besides, the US currency turned out to be pretty oversold after the collapse in recent months.
The coronavirus dynamics data may once again prove to be a reliable advisor to the future movements of the EURUSD rate, causing the development of retracement in the pair after a month and a half rally with potential targets at 1.1650 or lower, to 1.1450.
It is easy to get confused with the current stock market signals, which renews highs in the ashes of a ruined GDP. The foreign exchange market behaves much more reasonably in this context. Moreover, it is easy to notice the increasing influence of fundamental factors on the dynamics of rates.
In previous months, the US dollar tanked against a wide range of European currencies, due to the United States experiencing an increase in the number of daily new COVID cases, while Europe was relaxing its restrictions.
Improved performance in the US could bring back some of the faith in the dollar. Besides, the US currency turned out to be pretty oversold after the collapse in recent months.
The coronavirus dynamics data may once again prove to be a reliable advisor to the future movements of the EURUSD rate, causing the development of retracement in the pair after a month and a half rally with potential targets at 1.1650 or lower, to 1.1450.
#WaveAnalysis
#EURUSD reversed from resistance level 1.1900
Likely to fall to 1.1710
https://fxpro.news/market-snapshots/eurusd-wave-analysis-20-august-2020-20200820/
#EURUSD reversed from resistance level 1.1900
Likely to fall to 1.1710
https://fxpro.news/market-snapshots/eurusd-wave-analysis-20-august-2020-20200820/
#WaveAnalysis
#Nike broke multi-month resistance level 104.50
Likely to rise to 110.00
https://fxpro.news/market-snapshots/nike-wave-analysis-20-august-2020-20200820/
#Nike broke multi-month resistance level 104.50
Likely to rise to 110.00
https://fxpro.news/market-snapshots/nike-wave-analysis-20-august-2020-20200820/
Will data from Europe support market optimism?
In the FX market, EURUSD has managed to hold above 1.1800. The pair turned to growth after touching this level, and by the beginning of the European session, it reached 1.1880. The decline from 1.1965 to 1.1800 can be considered as a break for the bulls before another attempt to rewrite the multi-month highs and go above 1.2000.
The optimism of buyers looking ahead will be tested again today along with the publication of preliminary PMI estimates for August. This indicator has proven to be a reliable assessment of business conditions in the coming months.
If the Eurozone data turns out to be better than predicted, it may cause EURUSD to test 1.2000. At the same time, negative results of the indicators may return the corrective mood to the markets.
In the FX market, EURUSD has managed to hold above 1.1800. The pair turned to growth after touching this level, and by the beginning of the European session, it reached 1.1880. The decline from 1.1965 to 1.1800 can be considered as a break for the bulls before another attempt to rewrite the multi-month highs and go above 1.2000.
The optimism of buyers looking ahead will be tested again today along with the publication of preliminary PMI estimates for August. This indicator has proven to be a reliable assessment of business conditions in the coming months.
If the Eurozone data turns out to be better than predicted, it may cause EURUSD to test 1.2000. At the same time, negative results of the indicators may return the corrective mood to the markets.
US unemployment claims went back above 1.1 mln
The number of initial jobless claims in the USA unexpectedly increased last week to above 1.1M. On average, analysts expected this number to fall to 0.93M from 0.97M a week earlier.
Elsewhere, the number of continued claims has declined to 14.84M from 15.84M a week before. Here we can see a further decline in unemployment. However, the data has a week-long lag, so this corresponds to the week when there was a sharp drop in initial claims.
It is worth noting that the general trend of unemployment decline remains, which, however, is too slow not to cause concerns amid investors. An alarming factor is the end of the program of additional payments to the unemployed. Without them, the income of Americans promises to decrease significantly in August.
The number of initial jobless claims in the USA unexpectedly increased last week to above 1.1M. On average, analysts expected this number to fall to 0.93M from 0.97M a week earlier.
Elsewhere, the number of continued claims has declined to 14.84M from 15.84M a week before. Here we can see a further decline in unemployment. However, the data has a week-long lag, so this corresponds to the week when there was a sharp drop in initial claims.
It is worth noting that the general trend of unemployment decline remains, which, however, is too slow not to cause concerns amid investors. An alarming factor is the end of the program of additional payments to the unemployed. Without them, the income of Americans promises to decrease significantly in August.
#WaveAnalysis
#Apple continues daily uptrend
Likely to rise to 500.00
https://fxpro.news/market-snapshots/apple-wave-analysis-21-august-2020-20200821/
#Apple continues daily uptrend
Likely to rise to 500.00
https://fxpro.news/market-snapshots/apple-wave-analysis-21-august-2020-20200821/
#WaveAnalysis
#EURJPY reversed from resistance level 126.60
Likely to fall to 124.00
https://fxpro.news/market-snapshots/eurjpy-wave-analysis-21-august-2020-20200821/
#EURJPY reversed from resistance level 126.60
Likely to fall to 124.00
https://fxpro.news/market-snapshots/eurjpy-wave-analysis-21-august-2020-20200821/
#WaveAnalysis
#EURGBP reversed from support zone
Likely to rise to 0.9156
https://fxpro.news/market-snapshots/eurgbp-wave-analysis-24-august-2020-20200824/
#EURGBP reversed from support zone
Likely to rise to 0.9156
https://fxpro.news/market-snapshots/eurgbp-wave-analysis-24-august-2020-20200824/
#WaveAnalysis
#NZDUSD reversed from support zone
Likely to rise to 0.665
https://fxpro.news/market-snapshots/nzdusd-wave-analysis-24-august-2020-20200824/
#NZDUSD reversed from support zone
Likely to rise to 0.665
https://fxpro.news/market-snapshots/nzdusd-wave-analysis-24-august-2020-20200824/
Bears forced to surrender
Earlier this month, the S&P 500 was long attempting to reach historic highs. But by the end of that week, buyers returned to the market, breaking the correction mood. It seems that the idea of growing markets, with an economy that has not fully recovered, is becoming increasingly mainstream.
As a result, last week there was a record low of open short positions on S&P500, since at least 2004. This week’s rise in the index is likely to wipe out even more.
The question of what may happen next can be answered by a return to the foreign exchange market. The growth of the dollar from current levels will reveal the cautious mood of markets towards the prospects of a risk asset rally.
Earlier this month, the S&P 500 was long attempting to reach historic highs. But by the end of that week, buyers returned to the market, breaking the correction mood. It seems that the idea of growing markets, with an economy that has not fully recovered, is becoming increasingly mainstream.
As a result, last week there was a record low of open short positions on S&P500, since at least 2004. This week’s rise in the index is likely to wipe out even more.
The question of what may happen next can be answered by a return to the foreign exchange market. The growth of the dollar from current levels will reveal the cautious mood of markets towards the prospects of a risk asset rally.
Unexpected Consumer Confidence drop damaged the market's impulse
The Conference Board noted an unexpected and sharp deterioration in consumer sentiment in August. The Index in August fell to 84.8, the lowest level in 6 years, against an expected increase from 92.6 to 93.0.
Both the assessments of business and labour market, as well as expectations, have worsened (official release). The report notes that, despite some rebound in spending, consumers are generally concerned about the economic outlook. Consumers note a worsening of the labour market and business conditions.
This unexpected failure of consumer sentiment in the USA is in contrast to further recovery of the Ifo Business Sentiment Index in Germany, which was released earlier today. The American consumer is the primary driver of US GDP, while in Germany and the EU it is production and export.
As a result, American markets are under pressure after the weak CB report, and the dollar suspended its recovery.
The Conference Board noted an unexpected and sharp deterioration in consumer sentiment in August. The Index in August fell to 84.8, the lowest level in 6 years, against an expected increase from 92.6 to 93.0.
Both the assessments of business and labour market, as well as expectations, have worsened (official release). The report notes that, despite some rebound in spending, consumers are generally concerned about the economic outlook. Consumers note a worsening of the labour market and business conditions.
This unexpected failure of consumer sentiment in the USA is in contrast to further recovery of the Ifo Business Sentiment Index in Germany, which was released earlier today. The American consumer is the primary driver of US GDP, while in Germany and the EU it is production and export.
As a result, American markets are under pressure after the weak CB report, and the dollar suspended its recovery.
Growth in markets masks debt problems
S&P500 and Nasdaq100 once again rewrote their historic highs. At the same time, Dow Jones 30 closed the day in red, remaining 4.7% below its February highs. The composition of the indices explains this difference: the bias in high-tech stocks within the Nasdaq explains its overperformance in the last year.
However, this growth in stock indices conceals bankruptcies, which year to date in the US has been the highest in 10 years and two-fold jump in China compared to the 2019.
Access to credit allows them to borrow more corporate debt. However, we should not forget about the Greek experience. Sooner or later, the burden accumulated becomes too heavy to bear, even amid low-interest rates.
S&P500 and Nasdaq100 once again rewrote their historic highs. At the same time, Dow Jones 30 closed the day in red, remaining 4.7% below its February highs. The composition of the indices explains this difference: the bias in high-tech stocks within the Nasdaq explains its overperformance in the last year.
However, this growth in stock indices conceals bankruptcies, which year to date in the US has been the highest in 10 years and two-fold jump in China compared to the 2019.
Access to credit allows them to borrow more corporate debt. However, we should not forget about the Greek experience. Sooner or later, the burden accumulated becomes too heavy to bear, even amid low-interest rates.
Upbeat durable goods orders report lifts USD
Orders for durable goods in the US significantly exceeded expectations in July. The latest Census Bureau report showed an 11.2% jump last month vs 7.7% a month earlier and 4.4% expected.
The increase in orders over the last three months has brought them back to just 6% below February's peak. Orders excluding transportation are only 1% below February's level, which is a strong signal of recovery in business demand.
Except for the disappointing drop in consumer confidence yesterday, recent economic data from the US has mainly exceeded expectations, raising the Citi Economic surprise Index to a historical high and explaining the market's traction.
Besides, increasingly positive data supports the dollar: GBPUSD slipped to 1.3110, and EURUSD fell below 1.1800 after the publication of the Durable Goods Orders Report.
Orders for durable goods in the US significantly exceeded expectations in July. The latest Census Bureau report showed an 11.2% jump last month vs 7.7% a month earlier and 4.4% expected.
The increase in orders over the last three months has brought them back to just 6% below February's peak. Orders excluding transportation are only 1% below February's level, which is a strong signal of recovery in business demand.
Except for the disappointing drop in consumer confidence yesterday, recent economic data from the US has mainly exceeded expectations, raising the Citi Economic surprise Index to a historical high and explaining the market's traction.
Besides, increasingly positive data supports the dollar: GBPUSD slipped to 1.3110, and EURUSD fell below 1.1800 after the publication of the Durable Goods Orders Report.
#WaveAnalysis
#Silver reversed from support level 26.00
Likely to rise to 28.5
https://fxpro.news/market-snapshots/silver-wave-analysis-26-august-2020-20200826/
#Silver reversed from support level 26.00
Likely to rise to 28.5
https://fxpro.news/market-snapshots/silver-wave-analysis-26-august-2020-20200826/
#WaveAnalysis
#EURNZD reversed from resistance level 1.8200
Likely to fall to 1.7870
https://fxpro.news/market-snapshots/eurnzd-wave-analysis-26-august-2020-20200826/
#EURNZD reversed from resistance level 1.8200
Likely to fall to 1.7870
https://fxpro.news/market-snapshots/eurnzd-wave-analysis-26-august-2020-20200826/
Markets set for years of rock-bottom rates with new Fed framework
The Fed’s annual symposium is often used as a stage for announcing changes in monetary policy. This time Jerome Powell will hold online broadcast today titled ‘Monetary Policy Framework Review’.
Expected change in approach will make the Fed softer, as market participants will not only wait for price growth to return to target, but also to compensate the accumulated lag created by the recession.
This will be a positive signal to the stock markets and bad for the Dollar. Some estimates suggest that in the event of such a shift, the Fed will not raise rates in the next five years.
The Fed’s annual symposium is often used as a stage for announcing changes in monetary policy. This time Jerome Powell will hold online broadcast today titled ‘Monetary Policy Framework Review’.
Expected change in approach will make the Fed softer, as market participants will not only wait for price growth to return to target, but also to compensate the accumulated lag created by the recession.
This will be a positive signal to the stock markets and bad for the Dollar. Some estimates suggest that in the event of such a shift, the Fed will not raise rates in the next five years.
FxPro News
FxPro Blog for forex traders
On Thursday, the focus of the financial world will be on Fed Chairman Powell's speech at Jackson Hole announcing a review of the monetary policy fram...
Powell presented an update of the Fed's strategy, which increases attention to employment rather than inflation. As widely expected by markets, the Fed has unanimously adopted a 2% average inflation targeting strategy.
This means that if inflation falls below the target, the Fed will be tolerant of inflation rising above the target for "some period of time". Powell, however, denies the Fed's commitment to any specific formulas or inflation indicators.
Overall this is negative for the dollar and positive news for stock and commodities. In the previous 10 years, the average price growth rate was 1.7% for headline CPI and 1.9% for Core-CPI (ex food and energy). Applying the new strategy in the immediate aftermath of the global financial crisis would have meant that rates had to be kept near zero way after 2014.
The market's first reaction fits well with the fundamentals of the Fed's strategy change: the dollar rushed down (EURUSD touched 1,1900), while stock markets and commodities fired up (gold jumped to $1975). However, a full reversal of the movement took place within minutes. As the changes were expected, market participants started to "sell the fact", returning EURUSD below 1,1800 and gold collapsed to $1915.
In the long-run, however, it may have the potential to weaken the dollar.
This means that if inflation falls below the target, the Fed will be tolerant of inflation rising above the target for "some period of time". Powell, however, denies the Fed's commitment to any specific formulas or inflation indicators.
Overall this is negative for the dollar and positive news for stock and commodities. In the previous 10 years, the average price growth rate was 1.7% for headline CPI and 1.9% for Core-CPI (ex food and energy). Applying the new strategy in the immediate aftermath of the global financial crisis would have meant that rates had to be kept near zero way after 2014.
The market's first reaction fits well with the fundamentals of the Fed's strategy change: the dollar rushed down (EURUSD touched 1,1900), while stock markets and commodities fired up (gold jumped to $1975). However, a full reversal of the movement took place within minutes. As the changes were expected, market participants started to "sell the fact", returning EURUSD below 1,1800 and gold collapsed to $1915.
In the long-run, however, it may have the potential to weaken the dollar.
Board of Governors of the Federal Reserve System
New Economic Challenges and the Fed's Monetary Policy Review
Thank you, Esther, for that introduction, and good morning. The Kansas City Fed's Economic Policy Symposiums have consistently served as a vital platform for discussing the most challenging economic issues of the day. Judging by the agenda and the papers…
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