We’re starting off the week in a corrective manner, with the moves late last week being partially reversed as calm returns to the market.
Traders became far more risk-averse last week, particularly on Thursday following the release of the Fed minutes a day earlier. Perhaps too much was read into them or maybe the selling was opportunistic, a little profit-taking ahead of Jackson Hole, but the dips are being bought once more so the doom and gloom has passed fairly quickly.
There’s a growing amount of uncertainty in the markets as we head into September. The delta surge we’re seeing in so many countries now is a significant growth risk for the final quarter. China successfully eradicated it once more but few are going to take such a drastic approach, regardless of its success.
The US is still seeing cases and fatalities rising which is a growing concern. There may be strong resistance to more lockdowns but the numbers will no doubt take their toll on the economic recovery one way or another. The data in recent months has been fantastic but the outlook is becoming increasingly downbeat.
Which makes the Federal Reserve decision on tapering all the more important. What was looking like a fairly straight forward move now brings significant doubts. Jackson Hole looked the ideal platform for a taper warning but now, officials may be more inclined to see how the data unfolds over the weeks before the September meeting before dropping any major hints.
PMI surveys highlight ongoing concerns
The PMI data has been disappointing across the board today, with the same issues dragging on the data and giving more cause for concern in the coming months. Supply issues, rising input prices, hiring problems and delta concerns are once again among the challenges facing companies that will likely weigh on growth into year-end.
If the data continues like this over the next few weeks and the August jobs report doesn’t deliver, the Fed may be forced to reconsider before they’ve even started tapering. The case for doing so will weaken if we continue to see these trends in the data and Covid cases continue to rise in the US.
Bitcoin eyeing records
Bitcoin has recaptured USD 50,000; a big psychological victory for the crytocurrency that will no doubt get people talking about how long it will be until we’re back in record territory. In fact, there’s already murmurings of USD 100,000 but let’s face it, that’s been the case ever since it almost hit USD 20,000 years back.
Bullish momentum has been building for weeks now so it’s no surprise to see it break USD 50,000. It may still see some resistance around USD 51,000 but even that may prove temporary.
Paypal is continuing to throw its weight behind cryptos, introducing its offering to UK clients after successfully launching in the US. It’s just another step towards cryptos becoming more accessible and accepted and the news comes at just the right time.
For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/
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