Fed on track to taper by year-end – UBS

UBS reacts to Friday’s solid non-farm payrolls report

The firm comments that:

” Payrolls are 5.7 million below their pre-pandemic peak and that gap is narrowing month by month. The recent increase in COVID-19 case counts adds some uncertainty to the outlook, but we still expect strong job growth in the months ahead.”

Adding that by year-end, there should be enough progress to allow the Fed to announce tapering of its QE asset purchases.
ING also shares the same view, noting that with consumer price inflation set to hit a new high this week, it points to inflation staying higher for even longer and risks are skewed towards an earlier QE tapering announcement before year-end.

PBOC says will keep yuan exchange rate basically stable

PBOC remarks in its Q2 monetary policy implementation report

  • Prudent monetary policy should be flexible, appropriate, prioritise stability
  • Will keep liquidity reasonably ample
  • Will keep yuan exchange rate basically stable
Those are the key points to note, which just reaffirms their policy stance over the past few months. When it comes to these, China tends to preempt any imminent changes so the repeat of the commentary above means no change is expected for now.
As for the yuan, the PBOC seems to be wanting to keep it below 6.50 for the time being:

The 3 factors that combined for the perfect storm for gold

Try these on for size re the precipitous plunge in gold:

1. Gold rises in inflationary times … but the inflation we have now is transitory,  its not going to persist (or so we are told).
2. Gold rises in times of low-interest rates, but central banks will soon be tapering and after that comes rate hikes (real soon if the RBNZ is anything go by, August 18 hike is expected).
OK, that’s 2,  and those factors have been evident for a while, although Friday’s US NFP brought them more into focus. But still, why has gold dropped this morning? Number 3 …
3. This time of the week is the worst for market depth. I warn of this my first Monday post every single week. There are not always sharp moves, most of the time its a bit quiet … but occasionally the low liquidity can see extended moves. In the US the big traders are still heading home from the Hamptons. In the UK/Europe they are in bed for an early start Monday. In Asia they aren’t out of bed yet (relatively small markets of Australia and New Zealand excepted).
Gold dropped under $1700:
Go to top