Looking at the latest quotes of the Japanese yen or the Swiss franc, one can get the impression that investors are looking for safe havens, which may partly correspond to a very mild correction on Wall Street and a rise in US treasury bonds prices.
The Japanese yen rose to 109.4 against the dollar in the third week of August and was close to the 3-month highs reached at the beginning of the month. It appears that the reason for the JPY strengthening may be a general flight to safety due to concerns about the potential economic impact of the spread of the delta variant of the coronavirus. The mood was also not improved by data from China, which showed that China's industrial production rose 6.4 percent year-on-year in July 2021, against market forecasts of a 7.8 percent increase and following an 8.3 percent rise in the previous month. This was the weakest growth in industrial production since August 2020, amid the rapid spread of the delta strain of the COVID-19 virus, higher commodity prices and supply bottlenecks.
However, looking at the broader dollar market situation, its Index was unchanged at 92.5 on Monday, after falling more than 0.5 percent on Friday, the biggest dollar discount in seven weeks. Investors seem to be waiting for more clarity from the Fed on the tapering schedule. Fed Chair Jerome Powell will have his speech on Tuesday and the FOMC minutes are expected to provide more clarity on the Fed's moves on Wednesday. Still, all eyes are on the Jackson Hole symposium later in the month (26-28.08), when the Fed is expected to make a clear statement on the $120 billion monthly asset purchase program.
Meanwhile, on Monday's gold market, prices fell below the $1,775 per ounce level but remained close to weekly highs, which may also be related to the return to safety. Additionally, the dollar weakened and concerns about the health of the Chinese and US economies increased. U.S. consumer sentiment fell in August to its lowest level in a decade. What's more, in the gold market we could have had a week ago the so-called "takeout", i.e. the ejection of some players from their positions by the execution of stop losses, which resulted in a tumble on gold below 1700 USD. However, the week ended on a high in the region of USD 1780, which could mean the market picking up the lows and beginning a new impulse.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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