Forex news for North American trading on August 27, 2020:
- Powell unveils 2% average inflation goal in Fed regime change
- Powell Q&A: We're talking about 'moderate' overshoots
- US initial jobless claims 1006K vs 1000K estimate
- US Q2 GDP second reading -31.7% vs -32.5% expected
- Canada Q2 current account balance -8.63B vs -$12.2B expected
- 20 minute call between Pelosi-Meadows doesn't appear to yield break-through
- Fed's Kaplan: A 'moderate' overshoot on inflation probably means 2.25-2.50%
- Bank of Canada's Macklem: Bit of disconnect between measured inflation, views
- Laura looks to have spared major US oil infrastructure
- US July pending home sales +5.9% m/m vs +2.0% expected
Markets:
- Gold down $23 to $1930
- US 10-year yields up 5.4 bps to 0.74%
- WTI crude oil down 39-cents to $43.00
- S&P 500 up 6 points to 3485
- AUD leads, JPY lags
What did we learn today? The shift to average inflation targeting was mostly priced in but the kneejerk was some surprise as the dollar dropped but shortly afterwards it was more of a sell-the-fact trade -- particularly in longer-dated bonds. The dollar followed that but it only really stuck in USD/JPY.
The deeper you dig, the more it looks like a flailing market looking for something to hang onto; even tech didn't deliver its usual free money. Stocks did hit a new record but it was a rollercoaster that featured a big jump in volatility and brief, harsh selloff midway through the day.
At day's end, the dollar, euro, sterling, and franc are all close to unchanged after trying both the upside and downside. The commodity currencies are modestly higher as attempted breakouts were sucked back.
Gold was a loser as it fell $24 but still finished $20 above the lows. It soared initially on Powell to $1975 before crashing to $1910.
Where does it all leave us? There's US personal spending on Friday but it's tough to see that re-shaping the debate. I'm tempted to think that nothing has changed and the easy money fiscal and monetary policy paradigm is going to keep on doing what it's doing.
