Forex News for North American Trading August 25, 2020
How’s it for the evening news: US stock indices close at all-time highs as consumer confidence hits a 6-year low.
Consumers make up 2/3 of US GDP, but despite the index’s unexpected drop to 84.8 (expectations were 93.0), the stock markets were not deterred. The S&P and NASDAQ indices both closed at record highs today.
Certainly, the drop in confidence is due to the millions of Americans (the “poor”) who receive unemployment benefits thanks to Covid. These low-income workers have seen their benefits cut in half (there are no whispers of a budget deal as Republicans host the convention).
Meanwhile, the “haves” – who haven’t seen their jobs cut (at least for now) – are also reaping the rewards of a rising stock market.
Inventory gains are aided by hopes of a Covid vaccine sooner or later. The United States and China have also reported that Phase I of the trade deal is “alive and well.” Those words came from eternally antagonistic sales rep Peter Navorro. Of course, the Republican National Convention is shut down this week. As a result, it makes sense not to make waves about the non-compliance (what’s going on).
Either way, the major US stock indices (S&P and NASDAQ) are once again closing at record levels. The NASDAQ led the charge today with a gain of 0.76%. The Dow industrial average suffered mainly from declines by Apple and Boeing and three stocks – Exxon, Raytheon and Pfizer – which will be replaced as index members at the end of the month (leading to a rebalancing of sales of these actions)
For the US dollar today, the greenback closes lower on the day (lower against all majors except the JPY). It closes near daily lows against CAD, AUD and NZD as traders cannot ignore ‘risky’ flows. The fall of the JPY is support for the history of risk. The USDJPY and JPY crosses all close near their daily highs led by the GBPJPY which is up nearly 150 pips from yesterday’s close or 1.02%. The GBPJPY is the most evolved currency pair in trading today.
A higher movement in US yields today, as traders exit the relative safety of the US debt market, is also supporting risky flow flows. The 2-10 year spread widened to 53 basis points from 50.29 basis points at the close yesterday.