The U.S. dollar fell to a one-week low against a basket of currencies. This is after a survey showed U.S. consumer sentiment dropped sharply in early August to its lowest level in a decade. The University of Michigan said that its preliminary consumer sentiment index fell to 70.2 in the first half of this month from a final reading of 81.2 in July. That was the lowest level since 2011. It is also one of the six largest drops in the past 50 years of the survey.
Investors have been treated to a mixed bag of data. While U.S. producer prices data showed surging prices, bolstering the case for the Federal Reserve removing some of its stimulus. And that it followed U.S. consumer price data, which indicated inflation may be peaking, potentially giving the Fed room to remain accommodative for longer. Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto said that the prime driver was this idea that a deceleration in inflation pressures will reduce the impetus for an earlier tapering of Federal Reserve asset purchases. He also added that what has happened there is that the traders have moved their expectation for a tapering announcement from September toward November, perhaps even December.
Traders continue to look toward the Fed’s central banking conference in Jackson Hole, Wyoming, later this month, for clues to the Fed’s next move. Schamotta said that Federal Reserve Chair Jerome Powell may use the Jackson Hole platform to provide further clarity on the sequencing of the Fed’s monetary tightening operations. This makes it clear that a tapering announcement, when it comes, will not act as a temporal anchor for changes in the Fed funds rate. He even said that the goal is to tame a possible taper tantrum before it gets started. Sterling was 0.33% higher against the broadly weaker dollar, but remained on pace for a second straight week of modest declines as investors look for fresh catalysts for the British currency’s next move after Britain’s growth figures for the second quarter came in as expected. Elsewhere, bitcoin climbed 4.624% to $46,500, while Ethereum rose 5.81% to $3,221.52.
