Here is what you need to know on Friday, August 14:
The US dollar has been gaining ground once again as the bond-yield pendulum swings up again. Washington's fiscal impasse, a weak bond auction, upbeat jobless claims, and Sino-American relations will make way for retail sales figures for July.
1) Unsuccessful auction: After the 10-year bond auction succeeded and pushed bond yields back down, America's 30-year debt issuance on Thursday resulted in higher returns and pushed the whole curve higher. The US dollar was carried higher with it.
2) Fiscal impasse: The second upbeat dollar driver is the ongoing fiscal impasse in Washington. Republicans and Democrats blame each other for the statelame. Apart from disagreeing on federal unemployment claims and aid to states, the parties are at odds over funding to the US Post Office – essential for guaranteeing a quick count of mail-in votes.
3) Encouraging jobless claims: Data is the third factor boosting the greenback. US initial jobless claims dropped below one million in the week ending August 7 – the first such fall since the pandemic. Investors will be watching if the encouraging recovery in the labor market continues.
The focus now shifts to US retail sales figures for July, which are projected to advance at a moderate rate. America's economy is centered on consumption, making the top-tier figure critical for markets.
Later in the day, the University of Michigan's preliminary Consumer Sentiment Index for August is set to remain around July's 72.5 figure, low ground.
Gold has been edging higher, changing hands at around $1,950, extending its recovery.
US and Chinese negotiators meet over the weekend to take stock of the Phase One trade deal. Beijing wants to put recent US sanctions on TikTok and WeChat on the table. Investors are pricing in a successful round of talks despite clashes over various topics, including Hong Kong, Taiwan, and more.
Chinese retail sales disappointed with a drop of 1.1% yearly in July while industrial output growth stalled at 4.8%. THe world's second-largest economy is growing at a somewhat slower pace.
EUR/USD is trading above 1.18 yet off the highs. Coronavirus cases are picking up in Europe, with the UK requiring a quarantine for those returning from France and other countries. An update on second-quarter Gross Domestic Product is set to confirm that the eurozone economy shrank by 12.1%.
GBP/USD is trading below 1.31 after authorities announced some restrictions will be eased in England. Brexit negotiations are set to resume on August 18.
WTI oil is trading around $42, stable. Israel and the United Arab Emirates announced they would establish full diplomatic relations.
Cryptocurrencies are stable with Bitcoin trading around $11,700.
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