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04 Oct 2021
2 min read

US Dollar Steady, Gold Higher as Market Shifts Gears for Q4

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Key Takeaways

  • US dollar steadies after a long-running rally against the euro; non-farm payrolls ahead
  • Gold pushes higher as traders and investors seek a safe haven amid increased uncertainty

What’s on Focus in the Markets?

The US dollar opened this week’s market action subdued and relatively quiet. The greenback’s moves against major currencies over the past week were jittery and defined by increased volatility. Currency traders piled into the US dollar, pushing the euro to a 1-year low of $1.1562.

The low, last seen in July 2020, could be scooped up by euro bulls looking to enter the market this week. More precisely, traders could buy into the pair ahead of key economic data slated for Friday.

Other major currency pairs traded mixed last week. As they gear up for the final quarter of 2021, the British pound is grinding higher. Over the past two days, the GBP/USD gained over 150 pips, or more than 1%, to settle at 1.3550. The pound was heavily sold off during the first half of last week.

What’s the Price of Gold?

Gold advanced over $42, or about 2.5%, to $1,765 per troy ounce last week. In detail, the yellow metal was strongly favored by market participants as it’s famous for its safe-haven allure.

Still, despite the sharp jump, the price of gold is hovering about 10% below its highest point for the year. In other words, on Jan 6, the precious metal hit an annual high of $1,960 per troy ounce.

Where Are Stocks Headed?

US stocks rose broadly on Friday. Money managers flocked to the three major indexes after several days of weak performance. The Nasdaq Composite snapped a five-day losing streak. Moreover, the tech-heavy index added 0.8% to start October on a high note.

Meanwhile, the Dow Jones Industrial Average popped 480 points, or nearly 1.5%, on the first day of the month. At the same time, the S&P500 gained 1.1%, led higher by energy stocks and technology firms.

European stocks, on the other hand, could not kickstart October in the green. Bourses across the old continent touched their lowest in about two months. The pan-European Stoxx 600 dropped roughly half a percent on Friday.

Bitcoin and cryptocurrencies rose sharply over the last few days. The price of bitcoin reached a two-week high of $49,000 on Sunday.

Furthermore, the move helped lift the entire crypto market valuation above $2.1tn. On that note, cryptocurrency investors cheered the upbeat development and dubbed this month “Uptober”, projecting the monthly performance will be positive.

What’s in the News?

In the US, increasing uncertainty related to the withdrawal of monetary support from the Federal Reserve has clouded the financial markets. Since March, the US central bank has been buying as much as $120bn in monthly asset purchases.

To that end, Jerome Powell, Fed Chairman, has announced the US economy is healthy enough for the cash injections to be reduced. The monthly bond-buying, however, has been crucial to the rally in equities. With less monetary support, investors fear the extraordinary gains over the past months might fade.

In crypto news, Mr. Powell said in a hearing before Congress the Fed had “no intention to ban” crypto.

In Europe, data on Friday showed prices in the eurozone accelerated at the fastest rate in 13 years. In other words, the jump in inflation for September arrived at a 3.4% increase on an annual basis.

What’s Next?

The financial markets shift into gear for the fourth quarter. Increased volatility could be expected in different asset classes as investors position their portfolios.

In Washington, Senate Democrats will be busy this week working on President Biden’s $3.5tn stimulus package. However, some lawmakers have opposed the size and, as a result, the package could be trimmed down to $1.9tn.

Hiring in the US for September will be revealed with the latest non-farm payrolls slated for Friday.

Today’s Major Reports (EST times)

08:30 pm, Australia, Retail Sales (MoM)
11:30 pm, Australia, RBA Interest Rate Decision (Oct)
11:30 pm, Australia, RBA Interest Rate Statement

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