Gold slides again, firmer dollar, stocks muted
It has been an uneventful session today due to the absence of major macroeconomic news or corporate announcements. Stock markets in Europe and the US are up slightly despite the fears of rising Covid-19 cases, tighter restrictions and the possibility of tapering from the US central bank. Indices on both sides of the Atlantic have been trading in a relatively small range as dealers have had little to get excited about today.
The US dollar index is up for its sixth day in a row. Last Friday, the greenback jumped thanks to the solid jobs data, and that positive momentum has continued. Admittedly, the moves to the upside have been relatively small in the past couple of sessions. If the bullish run continues, it could clear the July peak, which would be a four-month high. The unemployment rate in the US is now at its lowest mark since the pandemic began, so that has increased chatter the Fed might look to taper its stimulus package sooner than predicted.
Gold is down on the session as the dollar is firmer. The metal has seen a lot of volatility in the past 48 hours as it experienced a flash crash on Sunday. Gold is comfortably above the low that was set on Sunday night, but it has dropped to the low of the session, so it seems the market is turning over on itself.
The German ZEW economic sentiment report fell to 40.4 in August, the lowest mark in nine months. Economists were expecting 54.9. The sharp fall could be a sign of declining confidence in the recovery. EUR/GBP and EUR/USD are down as a result. It is a little concerning the largest economy in the eurozone has witnessed such a sharp decline in business confidence. Economic indicators can be soft from time to time, so it might be a one off, but some dealers are fearful the ZEW number could be the beginning of a wider trend, after all, we have seen a slowdown in China.
Oil dropped to a three-week low yesterday due to concerns that China’s appetite for the energy would fall on account of the tighter restrictions. The second largest economy in the world is a major importer of energy so there were fears that demand could slide. Even though the number of new Covid-19 cases in mainland China has hit its highest mark since January, WTI and Brent crude oil have rebounded today, it appears the relatively low oil price attracted bargain hunters.