Good morning. Market went up and down a lot last night.
FRB Chairman Mr. Powell at Jackson Hole mentioned a monetary policy framework as targeted inflation of 2% on average (Average Inflation Targeting: AIT), allowing more than 2% during the economic downturn for a while, shifting monetary policy from inflation to employment condition He showed his intention to consider the economy more than inflation. However, the AIT has already been factored into the market and is not a new factor.
Immediately after Chairman Powell’s speech, USD was sold due to the view of a long-term low interest rate, and then the USD was bought back rapidly as long-term interest rates rose. But basically, it wasn’t the factor to buy the USD aggressively, and the USD was sold again. EURUSD dropped temporarily to 1.19, then fell sharply to 1.176, and then bought back again to 1.183. In the US market after the speech, in risk-on mood JPY was weakened (see currency strength), and AUDJPY has risen to 77.4.
Immediately after Chairman Powell’s speech, the US long-term interest rate was lowered, but after that, the factor was exhausted and it rose (bonds were sold), and it has risen sharply to 0.785%.
Even the world’s most liquid EURUSD chart shows seismograph-like vertical movement. In the short-term, USD was influenced by long-term interest rate movements, but in the long-term USD selling pressure will be unchanged. I also focus on spread of the second wave of COVID-19 in Europe. I have no position now.
Since AUDJPY has exceeded critical resistance, I will upload the daily chart.
Yesterday’s currency strength
US market last night
Dow30: 28,492 (+160, +0.57%)
NASDAQ: 11,625 (-0.34%)
WTI Crude Oil futures: 42.91↓
VIX index: 24.47↑
US 10-year government bond yield: 0.785↑
Gold futures: 1,934↓
Asian market today
Nikkei 225 futures: around 23,265（+55）
US Dow30 Futures: around 28,276（+59）
Economic indicators today
GMT 00:30 (US) Speech by President Trump
GMT 08:00 (Japan) Speech by Prime minister Mr. Abe
GMT 12:40 (US) Personal income/expenditure
GMT 13:05 (UK) Speech by Mr. Beily, BOE chaiman (the Jackson Hole meeting)
GMT 14:10 (US) Michigan sentiment