Overnight Headlines

*USD jumped 0.5%, advancing against all of its major peers

*US stocks were broadly lower, Nasdaq notched a record close

*Gold drops below $1800, falling back to trendline support

USD rebounded strongly above 92 on DXY snapping a six-day losing streak. Appetite for risky assets faded as concerns linger about the Delta variant’s impact. EUR fell for a second day rejecting the 1.19 area, ahead of tomorrow’s ECB rate decision. GBP fell below the 200-day SMA and trendline resistance from June. The UK’s PM Johnson announced plans to raise taxes while the BoE’s Saunders said rates rises may be quite contained . Common currencies all tumbled for a second day.   

US equities were mostly lower as growth took the lead in a relatively quiet session. The S&P500 fell 0.3% while the tech-heavy Nasdaq closed 0.1% higher. Asian markets are mostly muted, hovering just off six-week highs. Japan remains the exception as it continues to push higher after revised GSP figures beat expectations. US futures are essentially flat.

Market Thoughts – Fed speakers on the wires

After the disappointingly weak US jobs report last week, there will be some focus on several Fed speakers hitting the wires this week. A host of officials are scheduled to speak ahead of the blackout period starting on Saturday and the Fed meeting later this month.

Is the glass still half full or is “peak growth” affecting the jobs data? The weak NFP headline comes amid high and rising but volatile wage growth numbers. First to comment on last week’s key figures was well-known hawk Bullard. He repeated his previous calls for the Fed to start tapering, signalling confidence in the US recovery and ending purchases by the first quarter. Not much new there, NY Fed President Williams speaks later today.  

Chart of the Day – USD/CAD bounces off 200-day SMA

The Bank of Canada meeting this afternoon is not expected to produce any fireworks regarding policy changes. The bank has steadily tapered purchases in three stages already and policymakers are set to stand pat, with national elections on September 20 in focus. Cautious optimism should be the order of the day with possible acknowledgement that the outlook has weakened on the back of the disappointing Q2 GDP data.

The loonie has been influenced by global risk appetite recently with the dollar’s push higher yesterday taking USD/CAD to previous trendline support at 1.2656. The 200-day and 50-day SMAs acted as strong support at 1.2527 and 1.2559 respectively. Near-term targets above are the late August high at 1.2708.