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…
Feel free to use @FxProQuotesBot to get the latest FX, commodities and stock quotes you are interested in, as well as updates to recent and upcoming calendar events.
#WaveAnalysis
#USDCHF reversed from support level 0.9045
Likely to rise to 0.9160
https://fxpro.news/market-snapshots/usdchf-wave-analysis-27-august-2020-20200827/
#USDCHF reversed from support level 0.9045
Likely to rise to 0.9160
https://fxpro.news/market-snapshots/usdchf-wave-analysis-27-august-2020-20200827/
#WaveAnalysis
#Disney broke resistance level 131.60
Likely to rise to 145.00
https://fxpro.news/market-snapshots/disney-wave-analysis-27-august-2020-20200827/
#Disney broke resistance level 131.60
Likely to rise to 145.00
https://fxpro.news/market-snapshots/disney-wave-analysis-27-august-2020-20200827/
Fed kick starts multi-year weakening of the dollar
Yesterday the head of the Federal Reserve Powell announced changes in the monetary policy framework.
Outside of short-term market fluctuations, the announced changes in monetary policy may hurt the US debt market. After all, investors will now put into quotes a methodical weakening of the dollar’s purchasing power.
The debt and currency markets are signalling a sell-off in US debt securities, which could put severe pressure on the dollar, finally ending a 9-year trend of USD strengthening. Potentially, changes in Fed policy are laying the foundation for a multi-year weakening of the US currency against European competitors.
We may also see a repetition of the commodities bull market in the coming years, as was the case in 2000-2008 when the dollar was under systematical pressure.
Yesterday the head of the Federal Reserve Powell announced changes in the monetary policy framework.
Outside of short-term market fluctuations, the announced changes in monetary policy may hurt the US debt market. After all, investors will now put into quotes a methodical weakening of the dollar’s purchasing power.
The debt and currency markets are signalling a sell-off in US debt securities, which could put severe pressure on the dollar, finally ending a 9-year trend of USD strengthening. Potentially, changes in Fed policy are laying the foundation for a multi-year weakening of the US currency against European competitors.
We may also see a repetition of the commodities bull market in the coming years, as was the case in 2000-2008 when the dollar was under systematical pressure.
The yen jumps on Abe's resignation
The Japanese yen is leading the FX growth on Friday after news of resigning Prime Minister Shinzo Abe. The appreciation of the yen is a sign that investors are curtailing their foreign exchange carry-trade positions, selling stocks and entering into cash or liquid government bonds.
Since Abe came to power in 2012 to mid-2015, USDJPY grew from 77 to 126 ( or 64%) as one of its policy priorities (arrows) began defeating deflation by increasing the money supply. The exchange rate later adjusted to the current 105 as other countries also softened their policies, reducing the contrast with Japan.
Investors fear that Abe's successors may push the Bank of Japan to roll back its non-standard and extreme stimulus policies.
Even if this looks like pure speculation so far, traders should remember that uncertainty is a supporting factor for the yen, as Japan is a net exporter of capital, returning it home in any unclear situations.
The Japanese yen is leading the FX growth on Friday after news of resigning Prime Minister Shinzo Abe. The appreciation of the yen is a sign that investors are curtailing their foreign exchange carry-trade positions, selling stocks and entering into cash or liquid government bonds.
Since Abe came to power in 2012 to mid-2015, USDJPY grew from 77 to 126 ( or 64%) as one of its policy priorities (arrows) began defeating deflation by increasing the money supply. The exchange rate later adjusted to the current 105 as other countries also softened their policies, reducing the contrast with Japan.
Investors fear that Abe's successors may push the Bank of Japan to roll back its non-standard and extreme stimulus policies.
Even if this looks like pure speculation so far, traders should remember that uncertainty is a supporting factor for the yen, as Japan is a net exporter of capital, returning it home in any unclear situations.
#WaveAnalysis
#AUDUSD broke resistance level 0.7250
Likely to rise to 0.7400
https://fxpro.news/market-snapshots/audusd-wave-analysis-28-august-2020-20200828/
#AUDUSD broke resistance level 0.7250
Likely to rise to 0.7400
https://fxpro.news/market-snapshots/audusd-wave-analysis-28-august-2020-20200828/
#WaveAnalysis
#EURJPY reversed from resistance level 126.70
Likely to fall to 124.40
https://fxpro.news/analysis-and-insight/eurjpy-wave-analysis-28-august-2020-20200828/
#EURJPY reversed from resistance level 126.70
Likely to fall to 124.40
https://fxpro.news/analysis-and-insight/eurjpy-wave-analysis-28-august-2020-20200828/
#WaveAnalysis
#Gold rising inside daily up channel
Likely to rise to 2000.00
https://fxpro.news/market-snapshots/gold-wave-analysis-28-august-2020-20200828/
#Gold rising inside daily up channel
Likely to rise to 2000.00
https://fxpro.news/market-snapshots/gold-wave-analysis-28-august-2020-20200828/
Rushing to shares is a mistake during financial repressions
There are no free lunches in the economy, so record accumulated debts have fallen on governments’ shoulders. In many cases, these levels are approaching post-war records.
In that times, Fed used policy some called financial repressions.
Investors were forced to buy government debt with negative real rates.
However, this policy is only very briefly positive for the stock market. In the long run, debt growth is favourable for the market, which is further confirmed by this year’s market dynamics. Deeper market failures often accompany periods of declining public debt to GDP in the long run.
There are no free lunches in the economy, so record accumulated debts have fallen on governments’ shoulders. In many cases, these levels are approaching post-war records.
In that times, Fed used policy some called financial repressions.
Investors were forced to buy government debt with negative real rates.
However, this policy is only very briefly positive for the stock market. In the long run, debt growth is favourable for the market, which is further confirmed by this year’s market dynamics. Deeper market failures often accompany periods of declining public debt to GDP in the long run.
#WaveAnalysis
#AUDJPY broke resistance level 76.45
Likely to rise to 78.90
https://fxpro.news/market-snapshots/audjpy-wave-analysis-31-august-2020-20200831/
#AUDJPY broke resistance level 76.45
Likely to rise to 78.90
https://fxpro.news/market-snapshots/audjpy-wave-analysis-31-august-2020-20200831/