Forex news for North American traders on August 18, 2021
- US indices close at session lows
- US to start giving booster shots starting September 20
- WTI crude oil futures settle at $65.46
- FOMC Minutes: It could be appropriate to start tapering the asset purchases this year
- U.S. Treasury auctions off $27 billion of 20 year bonds at a high yield of 1.850% versus WI level of 1.850%
- Feds Bullard (hawk): Fed needs to take into account the "inflationary shock"
- European major indices close the day with mixed results
- CDC: Vaccine protection against severe disease remains relatively high
- Atlanta Fed GDPNow tracker lowered to 6.1% from 6.2% previously
- Crude oil inventories show a draw of -3.234M versus estimate -1.055M
- WHO speaking on Covid: Delta variant circulating in areas of low vaccination
- US major indices open lower. NASDAQ rebounds modestly higher in early trading
- Canada CPI for July 3.7% versus 3.1% last month
- US housing starts for July 1.534M vs 1.60M estimate
- The GBP is the strongest and the NZD is the weakest as the NA session begins
- ForexLive European FX news wrap: Kiwi slightly lower post-RBNZ
The North American session started with US housing starts coming in and much weaker than expected as higher costs, worker shortages and low supply continues to be an issue. Building permits did rise however, but they are just permits, not starts. Time will tell if they lead to more building in the future.
US stocks opened the day lower, the dollar was mixed with the GBP the strongest and the NZD the weakest (on the back of no change in policy by the RBNZ). US yields were higher by a few basis points.
As the day progressed, the dollar started to move higher, largely in anticipation of the FOMC meeting minutes at 2 PM. Pairs like the USDJPY move up to test the 110.00 level and its 200 hour MA at 110.037 (the pair closed yesterday at 109.53). The EURUSD moved below the lows for the year at 1.17035 on its way to 1.16929 before the release. The USDCHF raced above its 100 hour MA near 0.9160 and 200 hour MA near 0.9178 on its way to the new highs at 0.9196.
When the minutes came out, and the headlines started to trickle on the screen the dollar reversed some of its gains and although the greenback is still ending higher on the day, a lot of the gains are because of the NZD weakness (down -0.58% vs the USD). The other gains were trimmed vs the CHF, JPY, CAD, AUD and EUR. The dollar is closing near unchanged vs the EUR and down -0.13% vs the GBP.
What did the Fed minutes say:
- The taper goals were not yet met but progress was seen toward those goals
- The Delta variant posed downside risks to the economy, and
- Inflation was largely transitory
Digging deeper, although the taper goals were not yet made, most officials still sought tapering starting this year, with some seeing tapering in the coming months. However, several also thought tapering should begin early in 2022.
On inflation, the Fed staff revised its projections for inflation, but said there was no evidence of a broad-based price pressures. Nevertheless some thought it was prudent to prepare to taper due to inflation risks.
Of course the minutes came before the stronger than expected jobs report that showed over 1M jobs created (revisions included last month), but there has also been weaker housing, weaker retail sales and stronger inflation as well. In addition, most of the Fedspeak since the jobs report, has seen more about an earlier start to the taper. The exception being the Fed Chair himself. The focus will now turn to the jaackson Hole summit next week (August 26-28) where the chair will be largely expected to tip his hand --- will the taper be sped up or will it continue to drag on for a few more months to see (not hope) that the Delta variant does not kill the positive (but still short of pre-pandemic levels) job trends.
Nevertheless, the marketing focused on the minutes today and they were still less hawkish than what the market was expecting and the dollar declined.
Also, caught in the selling was the US stocks which saw the Dow and S&P close lower for the second consecutive day, and the Nasdaq lower for the 3rd consecutive day. All three indices also closed near the lows for the day.
In the US debt market, the US yields moved back lower with the 10 year closing near unchanged on the day and the 30 year lower by -1.9 bps.
