The market relaxes on the vast risk aversion that dominated the last week ahead of Friday’s Jackson Hole’s symposium. What are the major events and risk drivers as we head into a new week?
It’s been a better market mood as a fresh week begins with a higher risk appetite in the Asian session. Investors played the cautious game last week pushing bigger bids for safe haven as the risk assets suffered significant setbacks. The delta covid variant has transited into the 4th wave of the virus as policymakers pushed for another round of lockdowns. However, protests in Australia against lockdown extensions mean residents expect the government to find other methods. The former expect that vaccine doses should assist the world to live with the virus while the latter feared the health risks amid the massive burden this choice could place on health facilities.
Meanwhile, vaccination is going at a better pace with over one-third of the world already received at least a dose. With covid ramming again, investors begin to see the extension of the bank’s tapering timeline as a strong possibility. While the PMIs will dominate Monday, the market should settle in time for Thursday/Friday’s Jackson Hole symposium for the next Fed’s decision.
A general view of the market since late Friday suggests a recovery in mood, especially on equities. The S&P 500 has gained over 1.7% since the last Friday’s London session. Significant rebounds on the European and Asian equities is a sign that the market is very much opened to a disappointing tapering outcome on Friday or has probably priced in the effect.
The dollar index remains downbeat in the short term as the price head towards the 93 key area. EURUSD jumped above 1.17 but the Sterling remains below 1.37 after only gaining mildly. USDCAD is the most volatile among the major FX pairs, falling 200 Pips since the last Friday peak. Meanwhile, USDJPY stays sideways around 110 while high-beta NZDUSD and AUDUSD lose volatility despite a rapid dollar fall as a result of the lockdown extensions in the Aussie and Kiwi regions. The Euro-zone PMIs matched the market estimate.
Gold is attempting a breakout of a week range toward 1800. With the dollar plunging and US 10Y shedding further, 1800 for Gold should be quite easy this week. Meanwhile, Silver has been more volatile after shallow recovery as a risk-on commodity. WTI has gained over $2 on Monday after bouncing off $62 as risk mood brightens despite covid’s potential demand risk.
Bitcoin outshines the majority of the altcoins, surging over $50,000 over the weekend. Cardano, Ripple and Ethereum also lead the Alts race with significant resurgence. Other major cryptos are having their own share of the recovery albeit at a slower pace than Bitcoin.
The Week Ahead
Looking ahead, there is very little to consider on the economic calendar in the first half of the week after Monday’s Euro-zone PMIs. On Thursday, the market should regain traction as the US market reacts to the countries prelim quarterly GDP figures although the Jackson Hole symposium on Thursday and Friday will steal the majority of the headlines. Fed Chair Powell will give an important speech and the market would decipher the severity of the current covid wave on the US economy. Will the Fed shift forward the timeline of its much anticipated tightening policy or will go ahead with the plan nonetheless? Market participants will also factor in the core PCE figures due for Friday during the symposium. It’s therefore expected to be a volatile end of the week.
Disclaimer: This communication is for informational purposes only and should not be viewed as any form of recommendation as to a particular course of action or as investment advice. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. This communication has been prepared based upon information, including market prices, data, and other information, believed to be reliable; however, TigerWit does not warrant its completeness or accuracy. Trading CFDs involve risk and can result in loss of capital.