The US dollar started September with the mood that has been resonating over many months now – that of weakness. The US central bank’s dovishness coupled with the vaccine hopes from AstraZeneca sustained the risk-on mood in the market.
The pharma firm will be kicking off a 50,000-strong Phase 3 of its coronavirus vaccine
China’s Manufacturing Purchasing Managers’ Index clocked 53.1 points in August helped the dovishness set up by the Fed’s last week signal of a relaxed approach to inflation above 2 Percent. Richard Clarida, Vice-Chair of the Fed, also suggested that measures like yield curve control and negative rates are off the Fed’s radar for some time at least, even if not entirely ruled out. The bullish reports from Apple and Zoom helped tech stocks to gain added momentum.
Fed policy shift means the interest rates might stay lower for longer than earlier expected.
Meanwhile, the US stimulus talks between the Congressional Democrats and Republicans are stuck in an impasse with both sides sticking to their guns regarding the stimulus size and other details. The economy might require additional stimulus measures than currently anticipated, if the stimulus gets delayed, according to analysts.
Trump has managed to reduce the gap with his rival Joe Biden in the presidential campaign, as indicated in the polls.
The S&P 500 recorded the best performance in August, since 1986. Gold is trading near 2,000 dollars, and silver is also in the boil.
ISM Manufacturing PMI numbers might indicate industrial revival while the employment component of the PMI might reveal a soft job-underbelly. The market will be looking forward to Friday’s Non-Farm Payrolls, after taking cues from the ISM.
Euro is trading near 1.20 against the dollar – a two-year high. German growth forecasts might be upgraded later in the day while Manufacturing PMIs might point to weakness in France and moderate expansion in Spain and Italy.
GBP/USD is above 1.34 as Brexit and Tax concerns loom as parliament session recommences. The Markit/CIPS Manufacturing PMI is expected at 55.3 points for August.
AUD/USD reflected the risk-embracing mood and is trading above 0.74 in a day when the Australian central bank left the rates unchanged at 0.25 Percent and also decided to loosen the conditions for availing its funding facility.
USD/CAD might break below 1.30; oil prices are in green, even as the threat of hurricanes in the Gulf of Mexico recedes.
