Midweek Market Podcast – August 12

It’s a mixed picture in the markets. The greater focus this month is on when the Fed will commit to QE tapering, which could be the November FOMC, subject to spare capacity having been reduced further in the labour market.

The Market Week – August Week 2

Trading was on the quiet side this week as market sentiment swings between fear that the rapid spread of the Delta variant will harm the recovery and concerns that US data brought back tapering talks in the wake of the stellar US jobs report and hawkish leaning Fedspeak.

Analysts are now seeing a possible announcement on QE tapering by the Fed as soon as the September FOMC, though November or December seem more likely. The prospect of sizeable fiscal stimulus after the US Senate signed off the $1 trillion infrastructure deal should also reduce the need for monetary support.

USD pegged a new 3-week peak at 93.17. Over in the Treasury market, longer and shorter dated US treasury yields reached their highest levels since mid July with the 10-year T-note yield lifting to new -week highs above 1.370%.

Prime focus this week was on the US July inflation release, which came in more or less as expected. Greenback dipped after the data but the decline quickly ran out of steam, while the inflation debate is raging in financial markets and we can see just how sensitive price action is after Wednesdays US CPI data.

The EURUSD held close to its 4-month low at 1.1700, while USDJPY topped at 110.79. Cable flirts with 1.3800.  The ECB’s dovish stance, which contrasts with the BoE’s hawkish turn on the rate outlook and tapering talk at the Fed, is also keeping a lid on the EUR.

Key equity indices in both the US and Europe hit new record highs supported by strong earnings, but are mostly firmer. The USA500 holds over 4,400, the USA30 over 35,500 and the USA100 over 15,000.

The Gold price moved up at the mid of the week as the Delta variant spurred some safe haven buying and firmed USD after CPI data however tapering expectations are keeping Gold below the pivotal $1,800 level.

USOil prices had a volatile week, tumbling between $64.00-$68.00 on concerns about slower demand in China.  A spike to $68.58 was followed by a quick dip to $66.47 after a CNBC report that the White House will call on OPEC and its allies to boost production in an effort to combat escalating gasoline prices.

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Andria Pichidi

Market Analyst

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