Forex news for North American trading on August 26, 2021
- Major indices close near lows for the day
- Fed's Kaplan says again he sees resilience in the economy to the Delta mutant
- 11 Marines and one Navy medic killed in Afghanistan bombing
- WTI crude oil futures settle at $67.42
- U.S. Treasury sells $62 billion a seven year notes at a high yield of 1.155%
- Taliban official: Targeting innocent civilians is an act of terrorism
- Fed hawks weigh-in before Powells speech tomorrow
- UK Defense Ministry: No reported UK military or UK government casualties
- European indices close lower
- Kaplan on CNBC: Not seeing anything that would materially change his outlook
- Explosion takes place outside of Kabul airport
- Feds Bullard: We have a lot of inflation in the US. More than expected
- US Q2 GDP (second reading) +6.6% vs +6.7% expected
- US initial jobs claims 353K versus versus 345K estimate
- The EUR is the strongest and the CHF is the weakest as the NA session begins
- Fed's George: Communication in September meeting will reflect discussions on taper
The USD was the strongest of the major currencies today. The CAD was the weakest.
The move to the upside in the greenback was helped by comments from the Fed hawks ahead of the Fed Chiar Powells speech tomorrow at the virtual Jackson Hole Summit.
Fed's George started things off just before the US open saying:
- The Fed has made substantial further progress in its goals and it is time to start to taper process.
- Says that tapering should start sooner rather than later
Feds Bullard continued his hawkish ways saying that
- We probably don't need asset purchases
- We have a lot of inflation in the US,
- He is skeptical that inflation will moderate in 2022, and that it is currently more than expected
- Even with the new framework he looks for the taper to get going and finished by the end of the first quarter so that the Fed can have some optionality in 2022
- He is concerned that inflation is running faster than wage increases
- Is also concerned about the high price of housing and that buying mortgage-backed securities is counterproductive to slowing those increases
Dallas Fed President Kaplan then spoke and walked back his concerns about the Delta variant made last week (which prompted a move to the upside in stocks). He commented that:
- He is not seeing anything that would make material changes outlook
- His business contacts are saying that they are weathering the Delta variant
- Businesses are seeing resiliency and adaptable
- He is encouraged by the higher percentage of population that is vaccinated
- Hopes that the Fed will announce a taper plan in September
- Said that the purchases were designed to stimulate demand and that we don't have a demand problem anymore
- He still expects a rate hike in 2022
- He's in favor of a gradual taper with "gradual" meaning taking 8 months or so (which would take it toward the end of the 2Q).
The Fed chair speaks at 10 AM ET/1400 GMT tomorrow.
In other news today, initial jobless claims came in at 353K versus 345K estimate. That is near the post covid low of 349K from last week. The four week averages came in at post Covid lows.
The 2nd cut of US GDP for the 2Q came in at 6.6% versus 6.7% estimate. The PT price index came in at 6.5% while the core PCE came in at 6.1%. The gains were led by consumers and business investment. Inventories subtracted -1.3% from the gains.
Geopolitically, ISIS-K (a splinter group of the Taliban) is being attributed for a suicide bombing at the an entry gate into the Kabul airport. The bombing killed 12 US servicemen and injured many others.
After the news, stocks started to drift to the downside. Some of the declines may have also been attributed to an overbought market which has seen both the NASDAQ and S&P rise for five consecutive days and the Dow industrial average price rise for four days. The major indices all closed lower and near there lows for the day. The declines were led by the NASDAQ index it fell -0.64%. The S&P and Dow fell by -0.58% and -0.54% respectively. The Russell 2000 fell -1.13%.
European major indices all ended lower as well. Below are the changes and ranges for the major indices and North America and Europe.
In the US debt market rates along the yield curve were mixed:
In other markets:
- Spot gold is up $1.50 or 0.08% $1791.57
- Spot silver is down $0.30 or -1.26% at $23.53
- Crude oil is trading down -65 cents or -0.95% at $67.71
- Bitcoin had a rough day falling over -$2000 to $46,988
