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Daily Wrap Up 8 September 2021

8 Sep 2021 04:32 PM

Taper talk hurts Europe, dollar marches on

European equity markets are in the red this afternoon as there are some mild concerns the European Central Bank (ECB) might look to taper its bond buying scheme sooner than previously thought. Robert Holzmann, of the ECB, cautioned about significant inflation risks, and he also said the banks’ policy might be normalised sooner than expected. Traders are looking ahead to tomorrow’s ECB meeting. The consensus estimate is for rates to remain on hold. In the past few weeks, we have seen encouraging data from the eurozone as the unemployment rate fell to 7.6%, its lowest mark in over one year. Headline and core CPI have jumped too, so that suggests that demand is rising, and it is robust consumer appetite that will drive along the recovery.

Mr Holzmann caught some people by surprise with his relatively hawkish language this morning but seeing as the Federal Reserve didn’t set out a start date to taper its stimulus package at the Jackson Hole Symposium, the ECB are unlikely to become more hawkish than the Fed. The US economy was in far better shape that the eurozone before the pandemic struck, and its economic rebound has been more impressive too, so it would be a surprise if the ECB ramped up its rhetoric about trimming its stimulus package. The DAX and the CAC are down 1.4% and 0.8% respectively. The euro is having a mixed day, so it seems as if currency traders are not anticipating anything too exciting from the ECB tomorrow.

Over in the US, the mood is a little downbeat as the S&P 500 is offside by 0.25%. The JOLTS job openings report showed there were 10.93 million job openings in July - a record level. It is worth noting the report is a little on the old side as last week the non-farm payrolls report for August was revealed. If there is a large gap between job openings and people starting work, it could be a sign that perspective workers are seeking higher wages, or perhaps there are skill shortages.

The US dollar is powering ahead as it is up over 0.25%. It is the third consecutive day it is higher and the rate at which it is rallying its rising. AUD/USD is suffering again, this is due to the fact the Reserve Bank of Australia extended its bond buying scheme yesterday, and the wider rally in the US dollar is denting the currency pair too. USD/CAD is one of the biggest risers on the foreign exchange market as the Bank of Canada kept its policy on hold, in line with forecasts.

Gold has dropped to its lowest mark in almost one week as the upward move in the greenback is weighing on the metal.

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