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Powell reportedly faces growing resistance for second term as Fed chair

  
  Analysis

It will boil down to either Powell or Brainard for top dog at the Fed

Powell
The latest story by the WSJ says that while Biden’s economic team is generally supportive of Powell sticking around for a second term as Fed chair, some Democrats are pushing for a central banker more in sync with the party’s priorities.
The report adds that there are members at the camp, including prominent Democrat Elizabeth Warren, who are displeased with Powell’s approach to financial regulation and may prefer a change at the helm, citing people familiar with the matter.
For some context, Powell’s term is due to expire in February next year. As such, this will be more of a hot topic in the months ahead, so be sure to keep an eye on the reports and how things are progressing.

AUD/USD still largely caught in a consolidative range for the time being

  
Analysis, Forex

AUD/USD trims losses to flat levels on the day but price action since mid-July suggests a more consolidative range for the pair

The aussie traded down to 0.7317 against the dollar in Asia Pacific trading but has pared the decline to 0.7333 now, back to flat levels on the day.
There isn’t much happening leading to the slight nudge higher as the general mood among major currencies and the dollar stays more subdued, with little change observed. Meanwhile, risk remains tentative as US futures are still down 0.1%.
That’s just suggestive of some push and pull with the aussie dragged a little lower earlier by some flows on the data front and Australia’s virus situation.
AUD/USD D1 10-08
Going back to AUD/USD price action, the pair continues to be largely trapped between 0.7300 and 0.7400 as evident on the daily chart after having seen a series of lower highs and lower lows dragging the pair to the current range since June trading.
For now, there is more of a defined area that price action is settling in and there needs to be a break on either side to suggest any fresh directional movement in the pair.
Adding to that from a technical perspective, a ‘death cross’ looms on the daily chart with the 100-day moving average (red line) looking to cross over the 200-day moving average (blue line) in the pair for the first time since August last year.
That will be a bit of a blow to buyers, especially if the dollar continues to keep more resilient and we see a push below 0.7300 and the July low of 0.7289.
Such a play will leave little in the way of a push towards 0.7000 next, especially so if the virus situation in Australia continues to dampen the RBA/economic outlook.

US stocks close mixed. No records reached today.

  
Analysis, US Market

Dow and S&P snap 2 day win streak

The US stocks are closing mixed with no records set today.  Last week on Thursday, both the S&P and NASDAQ closed at record levels. On Friday, the Dow and S&P closed at record levels.  Today although the Nasdaq rebounded higher, it fell short of its record close.
  • The S&P and Dow both closed lower and with it, failed to close at a record high.
  • The NASDAQ closed higher for the fifth time in six trading days the Russell 2000
  • The Russell 2000 was the worst performer with a decline of -0.58%
Tthe final numbers are showing
  • Dow industrial average closed down -106.66 points or -0.30% at 35101.85
  • S&P index fell -3.82 points or -0.09% at 4432.70
  • NASDAQ index rose 24.4 points or 0.16% at 14860.20
  • Russell 2000 fell -12.96 points or -0.58% at 2234.81

Looking at some of the leading sectors:

  • Healthcare rose 0.38%
  • Consumer Staples rose 0.32%
  • Financials rose 0.31%
  • Communication services rose 0.03%
The leading declining sectors included:
  • energy, -1.5%
  • real estate, -0.41%
  • industrials, -0.40%
  • technology, -0.35%

Fed on track to taper by year-end – UBS

  
  Analysis

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

  
  Analysis

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:
USD/CNH
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