The US dollar has received a boost from several Fed speakers, which have talked up tapering. US Nonfarm Payrolls hints have come out mixed. The focus is on the BOE, which is set to refrain from moving on “Super Thursday.” China’s regulatory efforts and covid headlines are eyed. Gold, oil and cryptos are down.
Taper talk: Federal Reserve Vice-Chair Richard Clarida said that he sees an announcement about tapering bond-buying coming this year and risks to his inflation outlook as being to the upside. He also said that persistent price rises of 3% YoY would be considered more than transitory and that a jobless rate of 3.8% would be low.
Mary Daly of the San Francisco Fed, usually a dove, joined Clarida by saying that the bank could reduce its purchases as early as this year. The specter of fewer dollars printed boosted the dollar, sending EUR/USD from 1.19 to below 1.1850 and GBP/USD from roughly 1.3950 to under 1.39.
The dollar advanced alongside bond yields, with returns on 10-year Treasuries jumping toward 1.20%. Stock markets declined on Wednesday in response to the hawkish comments but have stabilized on Thursday.
US data was mixed, with ADP’s private-sector jobs report badly disappointing with only 330,000 positions gained in July while the ISM Services Purchasing Managers’ Index beating estimates with 64.1 points and an increase in the Employment component. Both data points serve as hints toward Friday’s Nonfarm Payrolls.
Thursday’s US highlights are weekly jobless claims, set to drop back below 400,000 and a speech by Fed Governor Christopher Waller.
The Bank of England is set to leave its policies unchanged on “Super Thursday” in which it publishes new economic forecasts. However, while the Monetary Policy Committee is projected to unanimously back leaving interest rates unchanged at 0.1%, at least one dissenter is likely on the BOE’s bond-buying scheme.
Michael Saunders is seen as voting for tapering the bank’s £895 billion program. If he is joined by Dave Ramsden or any other members, the pound could rise, but otherwise, caution would weigh on sterling.
Coronavirus: China has imposed new travel restrictions after reporting additional COVID-19 cases. The fresh spread of the virus is another concern about growth in the world’s second-largest economy, piling onto Beijing’s regulatory crackdown, which may spread from tech to other sectors such as alcohol consumption.
US daily coronavirus cases have neared an average of 100,000 with deaths and hospitalizations also on the rise. Infections are falling in the UK and showing signs of stabilization in some European countries. Japan and Australia are set to toughen restrictions.
Gold has dropped in response to the rise in US bond yields and WTI Crude Oil is hovering under $70, down after inventory data showed a substantial buildup.
Cryptocurrencies: Bitcoin is trading just under $40,000, marginally lower, while Ethereum is consolidating its gains under $2,700.
SOURCES: FXSTREET and LOTUS ACADEMY