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Morning Brief
Market sentiment is weak as the Thursday European session prepares to get underway after the FOMC meeting minutes on Wednesday appeared to be not as hawkish as expected, causing stocks to sell-off, and the US dollar to breakout against most major currencies.
Crude oil and Brent oil are also tumbling after the FOMC. Crude oil has been a big proxy for risk this year, and with oil prices falling it is likely that stock markets are likely to remain under pressure across the board.
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Looking at the FOMC minutes, FED officials clearly stated that their taper goals were not yet made, although most members still sought tapering starting this year, with some FED officials seeing tapering in the coming months and several also thought tapering should begin early in 2022.
Touching on inflation, the Federal Reserved revised their projections for inflation, but noted there was no evidence of a broad-based price pressures, while some thought it was prudent to prepare to taper due to inflation risks.
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It should be noted that the buck could be rally because the releases of the Meeting minutes came before the stronger than expected jobs report that showed over nearly one million jobs created. It should also be said that recent weaker retail sales and stronger inflation as well.
Naturally, the focus will now turn to the Jackson Hole summit next week, where the FED Chair Powell will be largely expected to announce taper. Much depends on COVID-19 also, and whether the FED expects that the Delta variant could kill the current positive job trends.
Perhaps the story of the morning is the EURUSD pair breaking the 1.1700 support level and tumbling and the DXY advancing to a new multi-month and very much looking to breakout on the positive momentum from the mentioned breakout.
Aside from the FOMC, the Australia monthly jobs report delivered a surprisingly strong headline number, with a +2,500 increase, widely beating the expectations for the report to deliver a -50,000 decline.
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Initially, the AUDUSD rallied, however but the move reversed as the data represents July and the outlook for August and September is increasingly threatened. The decline in the AUDUSD pair has not been as severe as the USDCAD and NZDUSD pairs.
Gold is also faltering this morning alongside silver. QE has been the big driver for precious metals over the last decade and any mention of tapering and we tend to see both metals taking a big hit.
Traders are investors are braced for the release of the weekly jobs claims and continuing jobs claims as COVID-19 starts to ravage the United States economy. Traders will also look out for the Philadelphia FED manufacturing survey, following the recent glut of weak US manufacturing data points.
