Overall markets were rather mixed for the moment. Dollar’s selloff was quickly choked off by strong ISM services overnight, even though there is no clear follow through buying. Traders are holding off the bets for now, awaiting tomorrow’s non-farm payroll figures. Sterling will come to the center of the stage today first, with BoE super Thursday. But barring the situation of drastic surprise in asset purchase voting, the event is unlikely to trigger some sustainable moves.
Technically, development in gold is a clear reflection of indecisiveness in the markets. Another attempt on breaking through 1833.91 resistance failed. Yet, it’s still holding on to 4 hour 55 EMA and 1800 handle. At this point, further rise is still in favor and break of 1833.91 would finally resume the rebound from 1750.49 to 61.8% retracement of 1916.30 to 1750.39 at 1852.96. On the downside, firm beak of 1789.42 support is needed to confirm completion of the rebound from 1750.49, in case of any pre- and post-NFP jitters.
In Asia, at the time of writing, Nikkei is trading up 0.44%. Hong Kong HSI is down -0.38%. China Shanghai SSE is down -0.06%. Singapore Strait Times is down -0.36%. Japan 10-year JGB yield is up 0.0046 at 0.009. Overnight, DOW dropped -0.92%. S&P 500 dropped -0.46%. NASDAQ rose 0.13%. 10-year yield rose 0.008 to 1.184.
Fed Kaplan wants tapering soon, but not aggressive on rate
Dallas Fed President Robert Kaplan told Reuters that, “as long as we continue to make progress in July numbers and in August jobs numbers, I think we’d be better off to start adjusting these purchases soon,” referring to the QE program.
He added that tapering over a time frame of “plus or minus” about eight months would help give the Fed ” as much flexibility as possible to be patient and be flexible on the Fed funds rate.”
He emphasized it’s “important to divorce discussion of the Fed funds rate from discussion of our purchases.” His comments on purchases are not intended to suggest I want to take more aggressive action on the Fed funds rate.”
Fed Daly ready for tapering by the end of the year or early next
San Francisco Fed President Mary Daly said in a PBS interview, she didn’t expect the Delta variant to “derail recovery” in the US. nevertheless, “it’s already very seriously interrupting the recoveries in the global economy,” which is a “headwind on US growth.
She’s looking for “continued progress in the labor market, continued putting COVID behind us, rising vaccination rates, the things that are so fundamental to us saying that the economy has achieved that metric of substantial further progress.”
Right now, her modal outlook is that “we will achieve that metric later this year or early next”. And, “we will do something on the asset front, asset purchase tapering, by the end of this year or early next.”
Fed Clarida: Will provide advance notice before making any changes to purchases
Fed Vice Chair Richard Clarida said in a speech that “we are clearly a ways away from considering raising interest rates and this is certainly not something on the radar screen right now”.
If outlook of inflation and unemployment turn out to be the actual outcomes, the necessary conditions for raising federal funds rate “will have been met by year-end 2022.” If inflation remain well anchored at 2%, commencing policy normalization in 2023 would then be “entirely consistent with our new flexible average inflatio