Global stock markets extended losses this past week as volatility cautiously picked up pace. This has brought the worst 2-week performance in US equities, such as the S&P 500 and tech-heavy Nasdaq 100, since earlier this year. Demand for safety helped boost haven-oriented currencies such as the US Dollar and Japanese Yen. Growth-linked crude oil prices also suffered.
( 16:09 GMT )
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Prolonging weakness in stocks may have been a combination of rising US-China tensions as President Donald Trump touted a ‘decoupling’ from the world’s second-largest economy. Concerns about lofty valuations in information technology stocks could have also played a role. Meanwhile, the British Pound suffered its worst week in months on rising no-deal Brexit bets.
With investors seemingly becoming increasingly cautious, all eyes turn to the Federal Reserve this coming week. The focus will likely be on its forward guidance and the latest assessment on economic conditions. Its balance sheet hasn’t materially shifted since early July, perhaps leaving markets yearning for further liquidity.
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The Bank of England and Bank of Japan are also on tap for the British Pound and JPY respectively. Will a jobs report bring volatility to the Australian Dollar? There also remains a divergence between the recovery in US equities and a lack of in consumer confidence. All eyes at the end of the week shift to the latest University of Michigan sentiment. What else is in store for financial markets?
If ECB President Christine Lagarde was hoping to curb the strength of EUR/USD last week, she failed. Instead, the pair is now well placed to reach new two-year highs above 1.20.
The price of oil approaches the June low ($34.27) ahead of the OPEC’s September meeting as US crude inventories unexpectedly increase for the first time since July.
The Nasdaq 100 index has retraced over 9% from its all-time high as profit-taking activities ramped up amid US-China tensions. Fundamental elements, however, tell a different story.
The Mexican Peso continues to outshine the Dollar, but USD/MXN is still 14% higher than the beginning of the year
All eyes on the Fed as they update guidance to fit their new mandate. While the ECB want to avoid a currency war.
The Australian Dollar may pull back as domestic economic activity and local inflation prospects plateau as geopolitical tension with China heats up.
The Kiwi dollar continues its short-term sell-off and may look to test the multi-week low. Next week’s Q2 GDP release may prompt a move.
Gold prices are higher this week with XAU/USD continuing to contract within the August range. Here are technical trade levels that matter on weekly chart.
The GBP/USD is in for another interesting week as Brexit intensifies; in a precarious position technically.
It was another week of gains for the Greenback – but next week brings the Fed.
Equity markets experienced further turbulence last week as volatility picks up in accordance with the change in seasons. With key technical formations under threat, where are stocks headed next week?
US DOLLAR WEEKLY PERFORMANCE AGAINST CURRENCIES AND GOLD