Markets rise after calm is restored by China


Markets rise after calm is restored by China

JULY 29, 2021

The U.S. Dollar is trading in weaker ranges this morning following an eventful Wednesday that gave markets the relief they were seeking. 


Chinese companies listed anywhere were plummeting after the government’s new policies aimed at not allowing certain firms to profit. To ease the tensions and loss of faith in the freer side of Chinese exposure, China’s head securities regulator convened a virtual call that included major international banks explaining that the government simply wants to affect the private education industry, nothing else, no other business activity. The world seems to be welcoming the news with a resurgence in risk appetite.

Furthermore, the Fed’s decision and presser yesterday established that while the Fed started discussing how they would go about tapering down the line, there is no urge at all to start tapering anytime soon. Fed Chairman Jerome Powell spoke at length about the uneven nature of the recovery and how there is nothing to worry about when it comes to transitory inflation spikes we are seeing.

There is much room for improvement across all sectors, not to mention renewed fears that the delta variant and infections rising will force a return to stay mostly at home for all. The mixed feelings are currently dollar-negative, and the month will end likely with the buck close to where it started July 1st, slightly weaker if anything.

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The Euro advanced as the buck crumbled because of better news for investors after a week of questioning the ability for economic growth to continue in the midst of a worrisome pandemic. Although Powell seemed more dovish than the statement that came out before his press conference, other central banks are likely to sing in the same tune with ongoing concerns about the delta variant and negative effects. ECB board member Fabio Panetta explained that indeed the current state of inflation is not sufficient to merit taking any support away from the economy via monetary policy.


Pound Sterling is now at its best level in a month over the greenback after the Fed’s decision and press conference left many feeling tapering is not coming this year. August will witness a speech by Jerome Powell out of the Fed’s annual Jackson Hole meeting in Wyoming. We will see a decision and Q&A from the Bank of England as soon as August 5th, in which perhaps Governor Andrew Bailey dampens enthusiasm over inflation and the need to delay tapering while the pandemic remains.