On Tuesday, the DOLLAR index fell to 92.13, its lowest level since May 2018, as the lingering impact of the Federal Reserve’s stimulus program sent the dollar broadly lower for a fifth straight day. Spot gold became more volatile, falling sharply to below $1980 after breaking through the 2010 dollar/ounce barrier before bulls quickly rallied and pushed prices back above the 2010 dollar/ounce level again. U.S. President Donald Trump on Monday vowed to create 10 million jobs in 10 months, including a tax credit for American companies that move manufacturing facilities from China to the United States and tariffs on companies that leave the Country to create jobs overseas. For now, markets are closely watching the Minutes of the Fed’s meeting scheduled for release at 2 a.m. Beijing time Thursday for hints of U.S. monetary policy.
Trump has vowed to create 10 million jobs by creating tax credits for companies moving back to the United States from China and imposing tariffs on companies leaving the Country
U.S. President Donald Trump on Monday vowed to create 10 million jobs in 10 months, including a tax credit for American companies that move manufacturing facilities from China to the United States.
Mr Trump, who is seeking to win support ahead of the November 3 election, told supporters on a visit to Mancator, Minnesota, that his administration would also strip federal contracts from companies that outsource jobs to China.
“We will give tax credits to companies that bring jobs back from China, and we will impose tariffs on companies that leave the United States to create jobs overseas,” Trump said in his hour-long speech. He also predicted that, should he be re-elected, the American economy would rebound strongly from the impact of the novel Coronavirus pandemic.
“What we’re doing together is nothing short of an economic miracle, and now we’re going to do it again,” Mr Trump told cheering supporters. We built the greatest economy in the history of the world, and now I have to do it again.”
With 11 weeks to go before his re-election campaign, and with unemployment at 10.2 per cent, Mr Trump has ordered domestic companies to produce goods and services at home, rather than in lower-cost places such as China.
“In Michigan, we have auto plants all over the place, and they’re growing,” Trump said. They haven’t seen anything like this in 42 years. We will end our dependence on China. We will produce critical drugs and supplies here in the United States.”
Mr. Trump praised the growth in retail sales in recent months. But data last week showed U.S. retail sales rose less than expected in July as consumers cut back on buying cars. This growth is likely to slow further in the coming months as rising coVID-19 infections and unemployment benefits are reduced.
The Trump administration is moving to rebalance the ECONOMIC relationship between the United States and China on a number of issues, including restrictions on Chinese companies like the technology giant Huawei, a ban on popular apps like TikTok, and a series of executive orders aimed at ensuring that key products are manufactured at home.
At the time, the government was using buy American requirements and incentives to persuade US companies to strengthen their domestic supply chains, particularly for critical goods such as drugs and medical equipment.
The Republican President trails the Democratic Biden in the polls on election Day. Despite the outbreak, he said, his tax cuts and other measures are strengthening the U.S. economy.
He said the government plans to further cut taxes and reduce regulations to encourage more domestic investment, but gave no details.
“We will end our dependence on China, and we will produce critical drugs and supplies here in the United States,” he said. He was apparently referring to an executive order signed last month to boost the production of drugs and medical equipment.
The dollar fell to a two-week low as it awaited a federal Reserve minutes
The dollar fell to a more than two-year low against a basket of currencies on Tuesday as the lingering impact of the Federal Reserve’s stimulus program sent the greenback broadly lower for a fifth straight day and lifted U.S. stock indexes to record highs.
While the DOLLAR often plays the role of a safe-haven investment in times of crisis, it has fallen sharply since the Fed intervened in financial markets to maintain liquidity during the Novel Coronavirus pandemic.
Despite economic data showing a bleak outlook for the U.S. economic recovery, the Fed’s program has pushed risky assets to record highs and reduced safe-haven demand.
Earlier in the day, the dollar index fell to 92.13, its lowest level since May 2018.
“It’s the Fed, it’s all the liquidity that’s been pumped into the market,” Greg Anderson, global head of currency strategy at BMO Capital Markets, said of the dollar’s decline.
A fresh rally in technology stocks provided a positive backdrop for the market, pushing the S&P 500 to an all-time high, surpassing the previous record set on Feb. 19 and further underlining the disconnect between stocks and U.S. economic data.
Anderson noted that The dollar’s weakness on Tuesday was not the result of any specific data release, but rather an increasing downward trend.
“Once the dollar gets entrenched, it’s like trying to turn around an aircraft carrier, which is hard to do. I think that momentum is established.”
Last week, net dollar bearish positions rose to their highest level since May 2011, and spot trading in recent days suggests they will only expand further since then.
The latest CFTC data showed that real money and leveraged investors tended to express negative views on the dollar through the world’s most heavily traded currency combination, pushing euro bulls to new highs in the week ending August 11.
Some currency analysts said the dollar would continue to struggle as Treasury yields fell further after recently hitting one-month highs. The yield on the 10-year Treasury note fell to a daily low of 65 basis points overnight.
Analysts at Brown Brothers Harriman said in a report Tuesday morning that the dollar could fall below the 90 mark as recession fears begin to mount.
“The DOLLAR index has fallen for a fifth straight day, breaking below last week’s cycle low of around 92.52,” analysts said. “After approaching the low of 92.243 in May 2018, there was no significant level support before hitting the April 2018 low around 89.229. The delay of the next stimulus supports our view that the U.S. economy will underperform in the third quarter, which should translate into continued underperformance in dollars.”
Gold volatility intensified V – shaped reversal
Gold prices were more volatile on Tuesday, rising as much as 1 percent on the day to climb back above the $2,000 level breached earlier this month before falling sharply, before quickly recovering to climb back above the $2,020 level. The dollar hit a more than two-year low as investors awaited details of the Federal Reserve’s strategy to combat the economic downturn triggered by the pandemic.
Earlier in the day, spot gold hit a one-week high of $2,015, 62 an ounce, breaking the $2,000 mark for the first time since early August. However, spot gold then plunged sharply from its highs, falling to the $2010, $2000, $1990 and $1980 levels before hitting a new session low of $1975.81 an ounce, nearly $40 lower than the session high. Spot gold then rallied again to $2010 an ounce, up more than $34 from its session low and up 1.3% on the day.
City Index analysts have noted that while gold has risen, it has yet to test key resistance levels. Unless gold recovers above $2,015 an ounce, it will remain in a consolidation phase. Spot gold briefly tested a $2015 high earlier in the day but failed to gain ground before falling.
Separately, analysts say the Treasury will auction up to $25 billion in 20-year bonds on Wednesday, which could keep the long end of the yield curve moving higher, reducing gold’s appeal and putting pressure on prices.
“As a result, gold has risen about $60 since yesterday afternoon,” said commodities analysts at Commerzbank. Investor optimism about gold was also reflected in the fact that gold etfs tracked by Bloomberg recorded inflows again yesterday for the first time in seven trading days.”
Still, gold is a long way from reaching its all-time high of $2,076 an ounce.
Commodity analysts note that, in addition to a weaker dollar and lower real bond yields, rising geopolitical tensions between China and the US continue to support gold’s status as a haven.
With gold prices back above $2,000, some commodity analysts say it is only a matter of time before prices return to record highs.
“In spite of last week’s correction, there are still factors driving gold higher. Central Banks and deficits are still at work, U.S. elections are looming, and tensions with China are getting worse, “Marios Hadjikyriacos, a market analyst at brokerage XM, wrote in a report On Tuesday.
Last week’s sell-off has done little to alter the market’s long-term mood.
In a recent report, Analysts at Citi raised their short-term forecasts for gold, which they see rising to $2,100 in the next six to 12 months. Analysts also said, “A break above $2,300 an ounce seems likely.”
“Record inflows from ETF investors, a weaker dollar and negative real yields have been the main drivers of higher prices,” analysts said.