Will US Inflation Revive Hopes for a Rate Hike?
The US inflation report, which was released on August 11, indicated that inflation has risen 1.7% YoY. Slowing inflation has been a concern for the Fed.
Equity markets in the US and across the globe reported heavy losses as risk aversion set in.
The Japanese yen (JYN) was back in demand as geopolitical tensions took center stage last week.
The British pound (FXB) had another negative week as a dovish statement from the Bank of England continued to drag the currency lower.
The euro (FXE) closed the week ending August 11 at 1.18 against the US dollar (UUP).
The S&P 500 Index (SPY) closed the week ending August 11 at 2,441.32, shedding 1.4% as compared to its August 4 close.
Equity markets around the world turned volatile last week as tensions between the US and North Korea escalated.
Last week’s rising geopolitical tensions between the United States and North Korea turned the tide for the yen. The Swiss franc also appreciated.
The last few days have been tense for the markets after the war of words between President Trump and the North Korean regime, and all the major indexes turned negative.
The euro appreciated ~11.9% against the US dollar in 2017 and is expected to increase further this year.
If Friday’s inflation numbers are below expectations, we can expect a further drop in bond yields and the US dollar (UUP).
The Japanese yen closed the week ended August 4 at 110.69 against the US dollar compared to 110.67 for the week ended July 28.
The British pound recorded another multi-month high of 1.3266 against the US dollar before the Bank of England announced its inflation report and interest rate decision on August 3.
For the week ended July 28, the total outstanding net bullish contracts of large speculators on the S&P 500 Index fell to 15,517 compared to 23,631 contracts in the previous week.
Volatility trended lower during the week ended August 4, 2017, as global markets remained close to recent highs. Apple (AAPL) beat market expectations, which helped the indexes remain close to their peaks.
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