Market news

Overnight Headlines

*USD slides to biggest one-day fall since May, as markets embrace risky assets

*US stocks hit new record highs after full approval of Pfizer-BioNTech vaccine

*Oil had its largest daily price increase since March, surging over 5%

USD is flat this morning after falling hard yesterday below the 93.19 July high. After posting its biggest weekly rise in more than two months last week, the dollar started the week on the back foot. EUR traded up to 1.1750, the highest level for a week. Despite the risk on tone, USD even traded weaker versus JPY. GBP pushed higher above July support/resistance but still below the 200-day SMA at 1.38. Strongest majors were the commodity-$s.

US equities closed just off fresh all-time highs though the Nasdaq made a new top, up 1.6%. Gains in US stocks were relatively broad based with a third of the S&P500 higher. The VIX fell again and is trading near 17. Last week’s losers like energy and industrials were the winners, overbought defensives from last week lagged. The rebound has continued in Asia this morning. Markets are up 1-2% as tech shares recoup some losses. European and US futures point to another green open.

Market Thoughts – Weak data sets back tightening talk

A decline in the PMIs out of the UK and US released yesterday increased worries about the strength of the recovery and impact of the Delta variant. With the recent drop in consumer sentiment as well, market consensus is shifting ahead of Jackson Hole. More caution by Chair Powell is potentially now expected with a tapering announcement pushed back to at least the 22 September FOMC meeting.

The RBNZ meeting last week showed that lockdowns and Covid infections can upset any planned modest tightening in monetary policy. The Fed is squarely focused now on employment gains. This means Powell may wish to keep his options open until at least the September NFP data. Risk markets will prosper with further delays.

Chart of the Day – Oil jumps on relief rally

Brent settled close to 5.5% higher enjoying its biggest one-day rally in five months. With taper doubts increasing, the dollar is struggling and this is providing good support to commodities. There was also a report of no Covid cases in China for the first time since July. If the latest outbreak is behind us there, worries about oil demand may now start to ease.

Black gold was hit hard last week printing its worst week since October last year. But prices were supported by the long-term trendline from the April 2020 lows. This week’s surge has taken oil above the July lows at $67.46 which now acts as support. The 100-day SMA sits above $70.43 as the next target for the bulls.

Jamie DuttaAnalyst / Trader

"With extensive experience as a full time trader and financial market commentator, I have worked as a trader in top tier investment banks and trading houses, including Morgan Stanley and GAIN Capital trading Forex, Index derivatives. and Bonds. I combine technical analysis with a deep fundamental knowledge to identify trade set-ups. My real life experience allows me to break down the complexities of financial jargon and trading. This means everyone can better understand the compelling forces of greed and fear which are realised every day in countless ways across markets."

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