This week volatility (VXX) has continued to stick to its trend of sudden spikes and then dropping immediately.
The key reason for the debt ceiling deal was to approve aid to Hurricane Harvey victims. A US government shutdown could have adversely impacted relief operations.
The US Federal Open Market Committee (or FOMC) is scheduled to meet on September 19 and 20 to discuss the current economic climate in the US and to decide whether any monetary policy adjustments are necessary.
Although the latest date that the US debt ceiling can be raised is September 29, there is usually a two-week extension to allow both sides to come to an agreement.
Risk aversion is likely to weigh on riskier assets like equities (QQQ) and cause bond spreads to widen.
August was a volatile month, filled with economic, political, and geopolitical uncertainty. September could turn out to be another nail-biter for the financial markets.
After regaining strength last week, the US Dollar Index started this week on a weaker note. The US Dollar Index is weak in the early hours on Wednesday.
The surprise turnaround in the US dollar after the August jobs report on Friday, September 1, 2017, saw the Japanese yen (JYN) lose its gains from August.
The British pound (FXB) appreciated marginally against the US dollar for the week ended September 1, 2017.
The US bond markets (BND) defied the fundamentals to remain weak for the week ended September 1, 2017.
The US Dollar Index (UUP) surprised the markets with its resilience despite a weak August jobs report.
For the week ended September 1, 2017, volatility in the global markets fell considerably.
John Williams, president of the Federal Reserve Bank of San Francisco, said that technology companies in the San Francisco Bay area are booming, and he sees no issues similar to the dot-com bubble.
The Fed, in its efforts to normalize policy, announced that it is starting the balance sheet unwinding program soon.
In its latest monetary policy statement, the Fed admitted it would take longer than expected for inflation to reach its 2.0% target.
In the last few months, the performance of the US economy has been impressive. The unemployment rate fell to 4.3% in August.
The Federal Reserve will meet again on September 19. Fed members will be faced with tightening the monetary policy further or giving a dovish statement seeking more time.
The US Dollar Index started this week on a weaker note after losing strength last week. However, it regained strength on Tuesday and Wednesday.
Volatility in the currency markets spiked after news of the North Korean missile launch on August 29. Demand for safe haven currencies like the Japanese yen (FXY) and Swiss franc (FXF) picked up in the Asian session.
US bond markets were the center of attention last week as central bankers’ comments at Jackson Hole could have induced volatility in the bond markets.