The US Dollar Index touched a multi-week low during early Thursday trading, carrying on the momentum initiated during the previous session after Jerome Powell made dovish comments over the timing of the tapering and rate hikes. The Fed’s chairman cited concerns over the state of the labour market to highlight how the economic recovery still has some ground to cover before the tightening of policies may begin. Even though none of what was said surprised the markets, it was nevertheless disappointing for those who expected a firmer stance over the timing of the shift in policies, with the resetting of expectations causing dollar weakness.
Gold is up during early Thursday trading, reflecting the losses of the US dollar due to the inverted correlation between the two assets. The greenback’s weakness resulted from dovish comments made by the Fed’s chairman, Jerome Powell, who pushed back on the timing of rate hikes and asset purchases tapering, highlighting concerns over the state of the labour market. Such remarks create a bearish outlook for the American currency, which lead to immediate gains for gold.
Share markets traded significantly higher in Europe on Thursday, extending gains registered in Asia overnight, as risk-off trading mood vanishes. Investors cheered positive news from both the US and China after the Fed delayed tapering talks and reiterated the transitory effect of inflation while Beijing took reassuring measures to stop the market rout and ease concerns towards big Chinese companies. Of course, with uncertainty coming from these two major market drivers lifted, and an earnings season which keeps on showing solid corporate results so far, investors are now ready to catch up with the stock market rally and open the doors to higher highs before the end of the week. That said, investors are likely to keep their focus on today’s US GDP data, especially after Jerome Powell said he will scrutinize the next macro release as more economic progress will be needed to switch to a more hawkish stance at the Fed. Elsewhere, stock traders will keep their eyes on Amazon, Airbus, Sanofi and Total who are all publishing their Q2 results today.
Pierre Veyret– Technical analyst, ActivTrades
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Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.