Forex news for North American trading on August 25, 2020
- S&P and NASDAQ closed at record highs once again
- Gold bulls need to keep an eye on the second-most important US election
- WTI crude oil closes at the highest since the pandemic started but key level looms
- Schembri says BOC looking at average inflation targeting, among other options
- Bitcoin slips to $11,250 in a 4% drop
- BOC's Schembri: Inflation expectations will be tested in pandemic
- US sells 2-year notes at 0.155% vs 0.157% WI
- US trade representative Navarro: Phase I trade deal alive and well
- Fed's Barkin: Does not see evidence that Fed's balance sheet is creating inflation
- Fed's Barkin: Firms are hesitant to hire and invest due to uncertainty
- European shares give up gains and close near session lows
- Prelim month-end fixing model points to USD selling vs EUR and GBP - Citi
- US new home sales for July 901K vs 790K estimate
- US August consumer confidence 84.8 vs 93.0 expected
- US August Richmond Fed manufacturing +18 vs +10 expected
- FHFA house price index for June rises by 0.9% vs. 0.3% estimate
- US June Case Shiller 20-city home price index 0.0% m/m vs +0.1% expected
- Philly Fed August non-manufacturing index +1.6 vs +0.7 prior
- The GBP is the strongest and the JPY is the weakest as NA traders enter for the day
How's this for the nightly news: US broad stock indices close at all-time record highs as consumer confidence hits a 6 year low.
What?
Consumers make up 2/3 of US GDP but despite the unexpected fall to 84.8 in the index (expectations were for 93.0) the stock markets were undeterred. The S&P and NASDAQ indices both closed at record levels today.
Admittedly, the fall in confidence is due to the millions of Americans (the "have nots") who are collecting unemployment benefits due to Covid. Those largely low income earning workers, have seen their benefits slashed in half (there aren't any whispers of a budget deal as the Republicans stage there convention).
Meanwhile, the "haves" - who have not seen their jobs eliminated (at least for now) - are also reaping the rewards from a stock market which goes higher and higher and higher.
Gains in stocks are being helped by hopes for a Covid vaccine sooner rather than later. The US and China also reported that the Phase I of the trade deal was 'alive and well'. Those words came from the eternally antagonistic trade representative Peter Navorro. Of course the Republican National Convention is off and away this week. As a result, it makes sense to not make any waves about non-compliance (which is what is happening) .
Anyway, the broad US stock indices (S&P and NASDAQ) are closing at record levels once again. The NASDAQ led the charge today with a 0.76% gain. The Dow industrial average suffered mainly due to declines in Apple and Boeing and three stocks - Exxon, Raytheon and Pfizer - that will be replaced as members of the index at the end of the month (resulting in a rebalanced selling in those stocks)
For the US dollar today, the greenback is closing lower on the day (down vs all the majors with the exception of the JPY). It is closing near the day lows vs the CAD, AUD and NZD as traders can't ignore the 'risk-on' flows. Supporting the risk-on story line is the fall in the JPY. The USDJPY and the JPY crosses are all closing near their highs for the day led by the GBPJPY which is up nearly 150 pips from the close yesterday or 1.02%. The GBPJPY is the currency pair that moved the most in trading today.
Also supporting risk-on flows flows is a move higher in US yields today as traders exit the relative safety of the US debt market. The 2-10 year spread moved out to 53 basis points from 50.29 basis points at the close yesterday.
