August 2021 Market Wrap

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The US Dollar climbed in August, bolstered by safe-haven demand as investors fretted over the political unrest in Afghanistan and the spread of the Covid delta variant. However, dollar gains were capped last week, after the highly anticipated Fed Chair’s speech at the Jackson Hole conference turned out to be a non-event, where Powell did not signal any deviation from Fed’s recent assessment of economic conditions and outlook for tapering.

Across the Atlantic, Euro extended its decline, struggling to pare recent losses against the Dollar as ECB affirmed their dovish stance in keeping interest rates at record low levels. Meanwhile, Bank of England has indicated a slightly hawkish tilt by suggesting that “some modest tightening” of monetary policy could be required within the next two years for continued economic recovery.

Elsewhere, Reserve Bank of New Zealand defied expectations of a rates hike and held its cash rate at a record low of 0.25%, after the resurgence of Covid cases last month which sent the country to a nationwide lockdown. RBNZ still maintained their hawkish stance, with expectations of a rate hike before year-end. Lastly, crude oil pared recent gains as the global economic recovery diminishes with the ongoing spread of the Covid delta variant.

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