Markets were relieved by the postponing of the U.S.-China trade pact as traders awaited Federal Reserve minutes and the Democrats’ nominating convention.
The dollar slipped by a bit, and commodity currencies were up as the eventful week ahead, and weak data kept the sentiments in check.
The US dollar index traded a bit lower at 92.987, reflecting dollar value against a basket of currencies. The current level is in the middle of the range seen in the index after the significant fall in July.
The pro-risk Australian dollar is trading near the weak high of 0.7196 – essentially pushing in the top end of the week’s range. The Canadian dollar pushed 0.1 Percent higher to 1.3253 for a dollar.
The Sino-US trade review, scheduled for Saturday, didn’t take place and analysts considered it as one uncertainty off-the-shelves for now. But, this was replaced by worries over US politics and the emergence of new virus spots in Europe. The latter can challenge the perception of the relatively good performance of the region in tackling pandemic and economic threat.
The minutes from the Federal Reserve’s last month’s meeting will be released on Wednesday and markets are looking to find clues for an anticipated change in policy outlook.
There are speculations that the Fed might adopt an average inflation target, which is to push inflation above two Percent for some time to make up for the time it stayed below that.
A lot depends on the bond market reaction to the Fed’s strategy. If the Fed drives down real yields, then the dollar will move in tandem and gold will gain in value; or it can be the other way around with increasing yields.
10-year US debt yield rose by around 15 basis points last week, the fastest weekly rise in two months. Yen lost in the bargain as the yield spike caused a capital flow against the currency. The Yen was trading at 106.51 a dollar while US 10-year yields are at 0.7012 Percent.
