Dollar making a move!

GURU WISDOM

 “The person who starts simply with the idea of getting rich won’t succeed; you must have a larger ambition.” – John D Rockefeller
 

MARKETS

The US dollar rallied against most major currencies on Tuesday, bolstered by surprisingly hawkish comments from Chicago Fed President Charles Evans. Evans was a surprise mover of the FX markets when all eyes had been on Chair Powell who was testifying to Congress. It was a volatile day for the British pound after UK Prime Minister Boris Johnson announced new COVID restrictions and made the shock announcement they could be in place until March 2021.

Stock markets rallied from oversold conditions with tech stocks seeing some dip-buying that drove the Nasdaq to outperform the other US major averages. Chinese stocks sank in a catch-up move to the drop on Wall Street but the moves across Asia were more mixed. European stocks saw modest gains but came nowhere close to recapturing yesterday’s losses.

Gold slid again thanks to the dollar strength but silver managed to finish in the green following yesterday’s massive 9% slide. Like stock markets, oil pared some losses but the gains were minimal. 
 

Hawkish Evans

There is clear division at the Fed about what the central bank’s next move should be since the economy looks to be at risk but while politicians have taken their eye off the ball. The White House and Congress have failed to reach a compromise on fiscal support when every move is ultra-political in the run up to the election. 

Evans is of the view that fiscal stimulus is needed and that open-ended QE does not form ‘an important part of the answer’. That contrasts starkly with St Luis Fed President James Bullard who last week said extra fiscal stimulus is not needed to continue the positive momentum in the economy.

Coming up.. PMIs

The RNBZ is expected to keep rates steady so the biggest news on the economic calendar will be the September PMI data. The general view taken from high-frequency data like jobless claims and travel / spending data is that the economic recovery is plateauing. 

Economies rebounded quickly when lockdown restrictions were ended but the large levels of unemployment mean economies are levelling out well-below pre-crisis levels. How the data measures up to expectations will help shape the view on whether calls for a plateaux are premature or too late.