Dollar Comeback Pauses

MARKETS

There was no follow through in dollar strength on Thursday as traders bought the dip in other currencies, gold and stocks. The British pound was the standout gainer with GBP/USD back above 1.32 as post-Brexit trade talks draw to an end for another week.

Gold and silver prices rebounded as the dollar softened with gold recovering $1950 per oz and silver back above $27. 

It was a mixed day across global stock markets. The stark warning on growth in the Fed minutes spooked Asian and European indices lower while Wall Street finished in the black thanks to gains in the big tech stocks.
 

GURU WISDOM

“Games are won by players who focus on the playing field –- not by those whose eyes are glued to the scoreboard.” ― Warren Buffett
 

Jobless claims

Unemployment claims figures are released weekly and so they are rarely market-moving, and they were not today. However, the move back above 1 million initial claims is symbolic and played a role in pausing the run higher in the US dollar on Thursday. The rise in claims comes the week after the additional $600 benefits agreed in the first stimulus bill ran out. The more evidence there is of the economic recovery stalling without another fiscal stimulus package in place could rattle markets.
 

Tech leads

The breadth of leadership is running very thin in stock markets. On Thursday Apple, Microsoft and Facebook rose 2% while many other sectors faltered. Big tech led the S&P 500 to new record highs this week but the breakout can only be sustained if other sectors participate in the moves up too.
 

Coming Up

The rise in the British pound comes ahead of the completion of another round of EU/UK trade talks. On Friday we can expect to hear from chief negotiators Barnier and Frost on their evaluation of how close the two sides are to a deal.
In the context of Wednesday’s bounce in the dollar and fears the economic recovery is cooling off, services and manufacturing PMIs could play an important role at the end of the week.