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Gold retreats after Powell signals tight monetary policy

“Some people can’t believe in themselves until someone else believes in them first.” – Sean Maguire

 

HEADLINES

  • Dollar rebounds as Powell commits to fighting inflation
  • Gold retreats after Powell signals tight monetary policy
  • Oil prices dips after U.S. Fed chair warns of economic pain ahead
  • Nasdaq falls over 2% after Powell's speech sparks tech rout
  • U.S. Treasury yields are higher after Powell speech
  • EUR/USD to have trouble making much headway above 1.00 – BBH
  • AUDUSD Near Term: Downside favored

 

 

Dollar rebounds as Powell commits to fighting inflation

 

The dollar index gained on Friday after Federal Reserve Chair Jerome Powell adopted a hawkish tone to battling inflation, but did not settle the debate on how large a rate increase is likely at the U.S. central bank’s September meeting.

Powell gave no indication of how high interest rates might rise before the Fed is finished, only that they will move as high as needed as it seeks to bring down inflation to its 2% target.

The dollar index was last at 108.56, up 0.09% on the day, after falling to 107.54 earlier on Friday. It is down from a five-week high of 109.27 on Tuesday and is holding below a 20-year high of 109.29 reached on July 14.

 

 

COMMODITIES

 

 

Gold retreats after Powell signals tight monetary policy

 

Gold fell 1% on Friday after Federal Reserve Chair Jerome Powell in his speech at Jackson Hole said the U.S. economy will need tight monetary policy "for some time" before inflation is under control.

Spot gold fell 1% to $1,740.79 per ounce by 11:05 a.m. ET (1505 GMT), en route to a second straight weekly decline, down about 0.4% so far. U.S. gold futures dropped 1.1% to $1,752.60.

Gold is considered a hedge against inflation and economic uncertainties. But rising interest rates make the non-yielding asset less appealing.

 

 

ENERGY

 

 

Oil prices dips after U.S. Fed chair warns of economic pain ahead

 

Oil prices edged lower in see-saw trading on Friday, as investors digested warnings from the head of the U.S. Federal Reserve that there is no quick cure for inflation.

Still, data has shown some small decline in inflation, with the Fed's closely watched personal consumption expenditures price index falling in July to 6.3% on an annual basis, from 6.8% in June. Inflation expectations based on the University of Michigan's measures also eased in July.

Brent crude futures fell 1 cent to $99.33 a barrel by 1:13 p.m. EDT (1713 GMT). U.S. West Texas Intermediate (WTI) crude futures fell 33 cents to $92.19 a barrel.

Both contracts rose and fell by $1 throughout the session.

 

 

STOCKS

 

 

Nasdaq falls over 2% after Powell's speech sparks tech rout

 

The Nasdaq led Wall Street sharply lower on Friday after Federal Reserve Chief Jerome Powell signaled the central bank would keep raising interest rates to tame inflation, sparking a selloff in growth and technology stocks.

All the 11 major S&P 500 sectors were lower in mid-day trading, with information technology (.SPLRCT), communication services (.SPLRCL) and consumer discretionary (.SPLRCD) stocks down between 2.5% and 3.1%.

The S&P index recorded three new 52-week highs and 32 new lows, while the Nasdaq recorded 24 new highs and 92 new lows.

 

 

U.S. Treasury yields are higher after Powell speech

 

Treasury yields were higher Friday after Federal Reserve Chair Jerome Powell delivered a speech on the central bank’s tightening path.

The 10-year Treasury yield traded at 3.058%, up 3 basis points. The 2-year rate, which is more sensitive to monetary policy changes, rose 5 basis points to 3.42%.

 

 

ANALYSIS

 

 

EUR/USD to have trouble making much headway above 1.00 – BBH 

 

“EUR/USD should continue to have trouble making much headway above 1.00. We believe the pair remains on track to test the September 2002 low near 0.9615.”

“The account of the ECB’s July meeting is worth discussing. The bottom line is that the ECB will continue to hike rates and simply hope that the market doesn’t test its resolve to keep peripheral spreads lower.” 

“We believe the account reflects ongoing reluctance of the creditor nation to unconditionally support the debtor nations. This is a dangerous stance to take as the September elections in Italy approach.”

 

 

CHART

 

 

AUDUSD Near Term: Downside favored

 

Technical View: Short position below 0.699. Target 0.6945. Conversely, break above 0.699, to open 0.701.

Comments: The pair is expected to resume descending after correction.

 

 

 

 

Source: Trading Central 

 

 

CALENDAR

 

 

*Times in GMT

 

 

 

 

Source: FX Street Economic Calendar


Footnotes
https://www.reuters.com/markets/europe/dollar-holds-firm-powell-speech-day-dawns-2022-08-26/
https://www.reuters.com/markets/europe/gold-falls-dollar-holds-ground-with-focus-powells-speech-2022-08-26/
https://www.reuters.com/business/energy/oil-prices-edge-up-signs-improving-demand-2022-08-26/
https://www.reuters.com/markets/europe/futures-ebb-powells-speech-nears-2022-08-26/
https://www.cnbc.com/2022/08/26/us-bonds-treasury-yields-move-higher-ahead-of-powell-speech-.html
https://www.fxstreet.com/news/eur-usd-to-have-trouble-making-much-headway-above-100-bbh-202208261209
 

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