The dollar was pressured on Friday as Fed Chair Powell delivered dovish tapering statements. The Jackson Hole symposium thus supported last week’s risk-on sentiment and is expected to continue this week. However, traders should watch for the OPEC+ meeting mid-week and Friday’s US employment reports.
The dollar index rejected further push above 93, finding resistance at 93.15, and then fell over 0.5% across the FX board. Fed Chair Powell gave positive clues concerning tapering asset purchases later in the year as against the market’s fear of an extension beyond December 31. However, he followed with dovish comments regarding interest rate and inflation and still regard Covid as a threat. The events supported bid for equities as investors’ appetite hiked. S&P 500 jumped above 4500 to hit another fresh record high gaining 1% from Friday’s opening price. European and Asian stock prices also added to gains and so were risk-on FX – AUD, NZD and CAD. Gold jumped above 1800 while WTI came close to $70 per barrel.
While the risk-on sentiment might continue this week, the market might relax a bit on Monday with some corrective moves across the board as we await the big events of the week in the second half of the week. Delta variants headlines remain one of the major risk drivers and could change the overwhelming weekly sentiment very quickly. Traders, therefore, need to watch out for development in that space. Aside from Covid, the economic calendar is light on Monday and Tuesday but loaded from the mid-week.
On Monday, UK banks will be on holiday but the market can look forward to the US monthly pending home sales data early in the New York session. The Chinese PMI, CAD monthly GDP and US CB consumer confidence reports would grace Tuesday and probably add more volatility to the market although the impact is expected to be short.
Wednesday is the big day for Oil traders as the OPEC+ oil cartel meets again amid the current delta variant spread and recent recovering oil prices. US crude oil inventories report would wrap up a solid day for the oil market. Meanwhile, on Wednesday as well, the US employment change and ISM manufacturing reports will be eyed keenly before Fed member Bostic’s speech in Birmingham in a two day event that extends till Thursday.
The US unemployment claims will be released earlier on Thursday before Friday’s US Non-Farm Payroll and unemployment rate data. The services PMI will come less than 2 hours later thus making Friday a big day for Forex traders.
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