The start of the week has been interesting, though the markets are being pushed and pulled around by the US dollar. Trading isn’t easy when there are a lot of areas to clear before prices can trend. Also, it is never easy trading when there are central bankers and politicians talking, as the Algo’s and headline traders can either front-run or be exuberant on every word they say.
This week’s trading started with Chinese CPI data which is reported to have come in just above expectations. But rather than the world’s second-largest economy has an effect on the global markets it was the moves in the yellow metal that got tongues wagging.
Chinese CPI year over a year came in at 9.0% beating expectations of 8.8% and up 0.2% from the previous reading. Now, if the Chinese CPI had been a lot worse and that had pushed the Yuan lower and the US dollar higher, we may have been able to attribute the gold move towards that economic data. As it is the USDCNH did move higher today but it is all about the US dollar and not the yuan.
The US dollar index has pushed towards the $93 at the London close having already tested that level at the start of electronic trading today. The London session was a grind-down, but the US traders have really picked the ball up and run with it. This could be because the Federal; Reserve FOMC member Bostic came out today and said, “substantial further progress on the goal of inflation has effectively been met, could achieve that on employment if there is another month or two of strong jobs gains.” Bostic also said that he thinks the Fed could start to taper purchases between October and December. The central banks like to pave the way forward with monetary voting members' comments to test the water. To see what sort of reaction the market is likely to give should they come to the official announcement. This could be the Fed doing just that as inflation is running hot and if China is also showing improving CPI it is going to be hard to keep pulling the ‘Transitory’ card.
With the Hawkish tones coming out of the Fed the Nasdaq found it hard to break much higher than mid-way in its Initial Balance range today, signalling that any trend that may have been on the cards is now put to bed. We’ll have to wait for some more dovish news or an infrastructure bill announcement. United States Senate Majority Leader Schumer stated today that the $1 trillion bipartisan infrastructure bill is on a "glide path" to be adopted in the upper congressional chamber on the morning of 10th August 2021. The US Senate was scheduled to be in the recess between the 7th August 2021 and 12th September 2021, so if they have to make a decision, I am sure they will want to do it at the earliest possible opportunity.
The USA’s Bureau of Labor Statistics reported that the number of job openings in the United States increased to a series-high in June to stand at 10.1 million, beating market expectations. This report all stated that the number of people quitting their job had risen to 2.7%.
US Treasury Secretary Janet Yellen has completed one of her tasks, which was to run the General Account down from the pandemic highs of $1.8trln to a more normalised $4 to $5 billion. Now that is done, today she came out and asked Congress to raise the debt ceiling to avoid causing irreparable harm to the economy. "Increasing or suspending the debt limit does not increase government spending, nor does it authorise spending for future budget proposals; it simply allows Treasury to pay for previously enacted expenditures," She added such a resolution is a bipartisan responsibility as "the vast majority of the debt subject to the debt limit was accrued prior to the Administration taking office."
Oil came down again today but failed to remove the stops that sat under the swing low formed in July. One more push takes that liquidity but if the buyers don’t step in the daily 200 ema below looks like a great target.