Ripple Effects of Jackson Hole Symposium Persist
The US dollar continued its freefall across the board. Last week’s announcement by the Fed of an average inflation target has cemented the negative USD real yield narrative.
This has continued to shift sentiment away from the greenback.
The dollar index dropped to its lowest level since 2018, closing just above the 92 handle. As of today, it would signal a 5th straight consecutive monthly decline.
Euro and Pound Benefit From Sentiment Shift
The weakened dollar was evident as the euro and pound both made significant gains on Monday.
The EURUSD pair reached a 2-year high as it closes in on the $1.20 mark. The euro was additionally bolstered with positive sentiment towards today’s eurozone PMI release.
The data is set to show a second consecutive month in expansionary conditions for the sector.
Adding to frailties of the dollar, cable closed 0.25% higher as it edges towards the 1.35 psychological area.
Yesterday marked the day in which the Chancellors ‘Eat Out to Help Out’ policy comes to an end. The UK government scheme offered diners 50% off sit-in meals.
However, with this offer now on the back burner, will we see another decline in the UK’s fragile hospitality sector?
Commodity Pairs Jump on Dollar Weakness
The Kiwi, Aussie, and Loonie all closed higher for a fifth consecutive day against the US dollar yesterday.
Investors traded the impact of the faded US dollar as the AUDUSD pair ascends towards $0.75 to a 2-year high. NZDUSD focuses on the $0.68 zone as it pushes for its highest price for over a year.
In addition, the Loonie closed 0.36% down as it hit a 9-month low.
Stock-Split Assists Record Highs
Wall Street recorded its strongest August return in decades, as vaccination hopes kept investors pushing equities to record highs.
Apple and Tesla’s stock split led the Nasdaq to surge 0.7% higher to fresh highs on Monday.
Microsoft fell slightly on the concern that China could block a possible sale of TikTok. The US-Sino trade war could escalate as China now tries to control software exports.
This led the Dow to end the session 0.8% down, with the S&P finishing 0.8% lower.
Risk Appetite Returns
Gold capitalized on a shift in risk as it closed to its highest level in nearly 2-weeks. The yellow metal closed 0.15% up on the back of expectations of the greenback remaining weak for the foreseeable future.
Silver also jumped on the bandwagon as it jumped 1.3% above $28, its highest since the beginning of August.
Crude Continues Sideways Dance
WTI continued its sideways move closing indecisively just below $43.
Price action suggests that traders have shrugged off Hurricane Laura’s impact at the back end of last week. Energy companies have continued their efforts to restore operations in the US Gulf Coast.
We now look ahead to the API data for any indications to a halt to the gradual incline of oil.