Risk appetite fizzles and dollar recovers amid Fed fears
The dollar is rising, and stock markets are slowly declining, as tension rises ahead of Fed Chairman Jerome Powell’s speech. In fact, durable goods orders from the US will draw attention after weak consumer sentiment and hopes for a vaccine remain high.
The risk appetite took a pause. The EUR/USD is back towards 1.18, and the GBP/USD is off the highs. The Japanese yen, a safe-haven, is gaining ground.
Jerome Powell’s speech on the Jackson Hole Symposium is considered to be a consequential speech.
The chairman of the Federal Reserve may indicate some form of the average inflation target, the AIT. The basic idea is simple: Instead of striving to return inflation over the medium term to the target rate of 2%, the Fed would intend to return the average of inflation over some time to the target rate. That looser policy is bad for the dollar. However, the level of uncertainty is high.
Gold is on the defensive, trading at around $1,920, amid fears that the Fed would not comply.
Consumer confidence dropped to 84.8 points in August, indicating a slower recovery. On the other hand, new home sales exceeded 900,000 annualized in July. On Wednesday, the focus was on durable goods orders for July, which leads to expectations for an extension of the recovery.
Hopes for the Covid-19 vaccine remain high
Hopes for a coronavirus vaccine remain high, with the University of Cambridge set to receive funding from the British government. President Donald Trump’s push for blood plasma treatment will likely hit a wall, as it has yet to prove efficient.
COVID-19 cases are increasing in Europe, with Spain leading the rise. Governments are reluctant to impose new blockades. The US curve of infected cases continues its downtrend, but deaths remain high.
China-US relations take a backseat after negotiators from the world’s two largest economies reported their satisfaction with the latest trade review.
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