- Markets are dominated by the unwinding of the “reflation trade” since last Wednesday’s FOMC projections and statement. This has seen a decline in all risk assets (with the notable exception of WTI Crude Oil which has held up so well), including stock markets, while money flows into the Japanese yen and U.S. dollar as safe havens.
- Global stock markets are strongly lower, with the S&P 500 Index closing Friday below its 50-day moving average, and the Japanese Nikkei 225 Index close to closing down today by more than 3.5%, which is a large decline.
- The EUR/USD currency pair is likely to see lower prices over the coming days following its technically significant breakout to new 50-day low prices. The USD and JPY are clearly the strongest major currencies right now, while there is significant short-term weakness in the euro, the British pound, and the Canadian dollar.
- WTI Crude Oil has surprisingly been spared most of the decline suffered over recent days by risky assets, finding support at $70.19 to bounce back after the dip.
- Last week saw a seventh consecutive weekly fall in global new confirmed coronavirus cases and deaths, suggesting that the current wave of the pandemic is starting to retreat. The effects of the vaccination programs in the most developed economies are now being felt.
- There are concerns that the Delta (Indian) variant is becoming globally dominant as it spreads very easily and seems more resistant to vaccines than previous strains.
- It is estimated that 21.5% of the world’s population has received at least one vaccination against the novel coronavirus.
- Total confirmed new coronavirus cases worldwide stand at over 179.2 million with an average case fatality rate of 2.17%.
- The fastest progression in terms of immunizing a population against the coronavirus in all but the smallest states has been in Iceland, Bermuda, Kuwait, Bhutan, Israel and Canada, which have given at least one shot to between 70% and 63% of their respective populations. For most of the world, a vaccine still remains distant. However, the pace of vaccination in the European Union, which now has immunized 47% of its population, has picked up significantly. In the U.S., 53% of the population has been vaccinated.
- The rate of new coronavirus infections appears to now be increasing most quickly in Bangladesh, Burma, Cuba, Fiji, Indonesia, Iran, Iraq, Kenya, Kuwait (despite its very high level of vaccination), Kyrgyzstan, Mongolia, Oman, Panama, Russia, South Africa, Tunisia, Uzbekistan, Vietnam, and the United Kingdom (despite its high level of vaccination).
Forex Today: U.S. Dollar, Japanese Yen Continue Advance
Adam Lemon
The collapse of the dominant “inflation trade” has sent risk assets lower while money flows into the USD and JPY.