Market volatility picked up pace this past week, with the Dow Jones[1] and S&P 500[2] pulling off their worst performance since June. Meanwhile, the tech-heavy Nasdaq[3] 100 slumped the most since March. The VIX ‘fear gauge’ soared the most since June. In the FX space, the haven-linked US Dollar[4] outperformed most of its G10 counterparts. Growth-linked crude oil[5] wobbled.
Historically speaking[6], September typically brings volatility back into financial markets as traders slowly return from the summer lull. This time around, there are concerns about lofty valuations in information technology shares. An upbeat US jobs report for August seemed to have helped offset dismal ISM services from Thursday.
The new week is shortened by the US Labor Day holiday on Monday, draining liquidity and raising the risk of volatility. As such, breaking news over the weekend could sour market mood further. Since equities bottomed in late March, extended selloffs in equities have been few and far between with most central banks around the world maintaining accommodative monetary policy settings[7].
This could be once again tested, not just this week, but this month as the 2020 US Presidential Election inches closer. On tap are the European Central Bank (ECB) and Bank of Canada (BoC) for Euro[8] and Canadian Dollar[9] traders respectively. What else do financial markets face in the near term?
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Fundamental Forecasts:
Euro Forecast: Major Resistance Now for EUR/USD at 1.20 as ECB Meets[11]
This Thursday’s meeting of the European Central Bank will likely end with confirmation that the ECB will do everything it can to stop
