Financial Analyst/Content Writer, RADEX MARKETS
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
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If last week’s charts are anything to go by, a large percentage of traders are too busy lounging around the pool or frolicking on the beach to contribute anything towards financial markets. It is mid-August after all; who can blame them. Trading volumes on the NYSE and Nasdaq were far below yearly averages last week as holiday season entered full swing and trading desks reduced to skeleton crews. If there was one pivotal talking point to latch onto, it was the fact that the US economy showed a second consecutive month of cooling inflation, at least according to the latest CPI data. The deceleration in consumer price growth was hardly anything to write home about, coming in 0.1% lower than the previous month, the salient point is the direction of travel. Less inflation means less chance of an interest rate hike, and indeed interest rate traders reacted accordingly, swinging more heavily in favour of a rate hold in September and October, but still leaning towards one adjustment to the upside during the December FOMC meeting.
The total lack of reaction in the US dollar was quite telling, suggesting that FX markets had largely pre-empted the shift over the prior two weeks. With that said, the greenback’s competitors have their own problems to worry about and the relative stability in the dollar currency index may be providing cover for broader turmoil. The euro is under pressure from the economic stagnation afflicting the European Union, while the yen remains at the mercy of low interest rates courtesy of the Bank of Japan. The Swiss National Bank has absolutely no interest in seeing the Swiss Franc appreciate in value either, turning global currency markets into a giant race to the bottom. Speaking of the yen, the joint intervention to prop up the Japanese currency has already begun to unwind, with USDJPY once again approaching 160. The DXY has remained under 100 points for most of August already and is once again on the back foot going into today’s session.
Easing expectations on the dollar allowed risk-on sentiment to come to the fore-front last week; precious metals undertook a minor leg up with gold reaching $4,375 per ounce by Friday and silver closing just shy of $65. US stocks recorded modest gains overall, as the S&P 500 edged to a fresh all-time high on Thursday, while the Nasdaq 100 added 1% to its tally to close the week back above 30,000 points. Semiconductors were the driving force behind the rally, meaning the jubilation did not spread as far as the Dow Jones, which lost half a percent last week. The rebound in tech sent a number of companies flying, most notably Sandisk (SNDK), which exploded 35% higher, while Western Digital (WDC) and Micron (MU) gained 17% and 11% respectively. Dell Technologies (DELL) also continued to surprise markets last week by pushing 8% higher into unexplored territory.
Not the most fascinating of economic calendars in the days ahead, but there are still a few events worth keeping an eye out for. Wednesday will see the publication of the latest batch of UK and European inflation data, both of which will factor into future interest rate predictions on their respective currencies, but the main event will be the release of the FOMC minutes covering the July meeting. Comments from different board members will be all the more interesting given that the gathering occurred before the most recent inflation reading. On Friday, currency traders will have to tune in to the July inflation figures in Japan, which will play into interest rate dynamics in the yen. On earnings calendar, Walmart (WMT) may be worth paying attention to on Thursday because it offers an independent glimpse into US consumer spending – a metric that fell sharply according to last Friday’s retail sales figures. With the macro calendar cleared, the spotlight may well return to geopolitics this week, as the US-Iran memorandum of understanding expires and diplomatic relations in the Middle East continue to sour.
About the Author
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
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