The S&P 500[1], a frequent bellwether for general risk appetite, extended losses into a third consecutive week. The tendency for economic data in the world’s largest economy to surprise higher has been shrinking since the middle of July. Catching a bid lately has been the anti-risk Japanese Yen[2] and to a lesser extent the haven-linked US Dollar[3].
This past week, the Federal Reserve might have left investors wanting more, especially on the quantitative easing aspect. Doubts over further US fiscal stimulus may have also played a role in keeping the USD[4] suppressed. Sentiment-linked Crude Oil prices[5] were on the rise, bolstered by a combination of falling US crude inventories and compliance in output from OPEC+ producers.
With that in mind, all eyes turn to testimony from Fed Chair Jerome Powell and Treasury Secretary Steven Mnuchin. They will be talking before the House Financial Services Committee on the CARES Act. Across the northern border, the Canadian Dollar[6] will be eyeing Prime Minister Justin Trudeau. He will be offering a new agenda for a spending plan amid the economic recovery.
Following recent strength, the New Zealand Dollar[7] awaits this week’s RBNZ monetary policy announcement. Informal contacts between the United Kingdom and the European Union around Brexit may drive volatility in the British Pound[8] and Euro[9]. Volatility risk, as shown by the VIX ‘fear gauge’, seems to be on the decline however. What else is in store for markets ahead?
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Fundamental Forecasts:
Euro Forecast: EUR/USD Outlook Turns More Bearish After Failure at 1.20[11]
The outlook for
