An extremely strong US dollar eclipsed gold’s 0.11% drop. The dollar gained nearly ½ percent (0.47%), gaining a total of 0.436 points, and is currently pegged at 93.58. On a closing basis, the dollar index is at its highest trade value this year. The dollar index reached 93.48 at the end of March 2020 and from there it traded sharply lower until it found support at 89.525.
In exactly one week, members of central banks around the world, including members of the Federal Reserve, will gather in Jackson Hole, Wyoming, for the Annual Economic Symposium. While it is widely expected that market participants will have a better insight into the current thinking process of Federal Reserve members, including when they begin to cut their monthly asset purchases by $ 120 billion in government bonds. Treasury and MBS (mortgage backed securities).
Currently, however, the belief is that no concrete announcements will be made at the symposium, as Federal Reserve members await the August 2020 Department of Labor employment report to determine whether their criteria for “substantial progress “; new jobs created. For this reason, many analysts believe that any concrete announcement with timelines for the start of tapering will take place at the September FOMC meeting.
The minutes of last month’s FOMC meeting indicated that the majority of Fed officials believed it was time to start normalizing their extremely accommodative monetary policy by first allocating less capital on a monthly basis to their asset purchases. At the same time, it is not widely accepted that we will see interest rate hikes immediately this year and that they will most likely stay where they are for at least the first three quarters of 2022.
The current “dot plot”; indicates that there will be no interest rate hike until 2023. However, the Fed has insisted that economic data will guide the Federal Reserve’s tenure and determine when it is time to start normalize its monetary policy to reflect the post-pandemic economy.
The only caveat to recent reports suggesting strong economic growth, such as declining jobless claims in the United States, along with last month’s report that showed the leading economic index jumped 0.9% on Last month is the unknown when it comes to the new Delta Variant of Covid-19. The new Delta variant has delighted parts of countries around the world, including the United States. The Johns Hopkins University of Medicine reported that as of Friday, August 13, the number of Covid-19 cases has exceeded 205 million individuals, including 4.33 million people who have died from the virus.
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