US Open Note – Stocks drift at record highs and dollar loses some resilience



Markets freeze as Fed meeting underway; US Consumer Confidence ahead

It seems continued selling in Chinese tech giants has somewhat hampered risk appetite, which has been further muted as investors hold a cautious stance awaiting the conclusion of the Federal Reserve’s policy meeting tomorrow. The Fed is faced with a slightly more difficult task in this meeting as it will have to expand on the delta variant’s impact over bond yields as opposed to the outlook on rising prices, not to mention the timeline of potential taper talks, as well as whether its hawkish stance will hold. Nonetheless, it will be interesting to see how the dollar holds up as other central banks lag behind the frontrunners that move closer to possible taper developments.

The dollar index is in the vicinity of its three-month highs but is surrendering today’s gains from its intraday peak and is currently at 92.50. The 10-year yield at 1.23% is not providing any assistance to the greenback, as it weakens against its major peers in the forex arena. The dollar gave up most of yesterday’s gains versus the euro, the pound, the franc and the loonie. Moreover, the USD/JPY pair dived back below the 110.00 mark.

The euro and the pound moved a tad above their $1.1800 and the $1.3800 marks respectively. The aussie and the kiwi recaptured early Asian weakness finding their feet around their previous lows of 0.7330 and 0.6945 respectively, mainly on the back of a dwindling dollar, rather than a pickup in risk sentiment.

Today’s numbers for new orders for US manufactured durable goods and the core headline durable goods m/m figure resulted in a deceleration in June, probably due to the fact that estimates for May were revised optimistically higher. The new orders outcome came in at 0.8% versus the forecast of 2.1% and the headline durable goods expectation was at 0.3% against an estimate of 0.8% for June. Nonetheless, the surprise miss seems to have weakened the dollar less than would be expected. The Fed meeting may be the culprit for this muted effect as well as the upbeat figures for the US Housing price index.

Commodities seem lethargic

WTI oil futures held flat around the $72.00 per barrel mark, even as delta-related coronavirus infections persist, while gold pushed marginally back above $1,800/oz level as FOMC jitters shifted the greenback onto its back foot.

Upcoming is the US consumer confidence and the Richmond Manufacturing Index at 14:00 GMT.

Later on Apple, Microsoft and Google are expected to announce earnings after the market closes.

Then at 01:30 GMT Australian inflation numbers are due.

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