Markets Worry Recovery has Peaked
SEPTEMBER 08, 2021
The U.S. Dollar is looking to improve all across the board continuing yesterday’s mood of pessimism over the economic recovery from this pandemic.
Indeed, equity markets were in the red as investors started September with growing concern that the loose monetary policy tools to make for an easy financial environment as the world coped with the medical crisis and inactivity could start being taken away. More importantly, economic indicators are still giving a sense that expansion is truly slowing down in many sectors of the economy. Traders seem to be indicating that they thought the situation would look a lot better by this late point in the year.
Ultimately, the buck could gradually and slowly recoup what it lost at the end of August when the belief was the Fed was readying itself for quantitative easing tapering. Forget about even chances of an interest rate hike in the next year. We shall see how the potential for big spending here could make the buck an even more reliable safe haven. At the moment, no piece of data nor announcement of any kind seems to be challenging this current risk-off trend.
What to Watch Today…
- No major economic events scheduled for today
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The Euro is not on its way up, but the story behind the shared currency has changed a bit with evidence that Q2 was indeed a great economic period in the Euro-zone recovery. Gross Domestic Product for Q2 was revised upwardly from 2.0% to 2.2%, adding to the belief that the Euro-zone is indeed experiencing enough good fortune for the European Central Bank to start taking away the Pandemic Emergency Purchasing Program (PEPP). Industrial Production came out also better than expected at 1.0% over the 0.7% estimate.
We likely will see swings for Euro as consensus looks to be established in this line of thinking and PEPP will not go away until they do actively take it away.
Pound continues to dwindle as the U.K. looks to revive government revenue via tax rate hikes. Prime Minister Boris Johnson has been doing a lot of work to convince his own party of going this route instead of just creating pro-business incentives. We do not yet know if this could add to the slow down in economic advancement for the nation, which has also been dealing with the added costs of trading under new post-Brexit rules. We see Sterling stuck where it is at until there is more clarity about the effects of government taxes in the midst of efforts to bring the economy back to pre-pandemic growth.