Forex Today: Risk appetite fades, dollar recovers, amid fears of the Fed, ahead of data

Here is what you need to know on Wednesday, August 26:

The dollar is rising and stocks are edging lower after the reverse moves on Tuesday as tension mounts ahead of Fed Powell’s speech. US Durable Goods Orders are eyed after weak consumer confidence and hopes for a vaccine remain high.

Risk-on takes a break: EUR/USD is retreating toward 1.18, GBP/USD is off the highs, and the safe-haven yen are gaining ground. Jerome Powell, Chairman of the Federal Reserve, will be speaking on Thursday in what is described as a “consequential speech.”

Powell may indicate some form of Average Inflation Targeting (AIT) – allowing prices to “catch up” and overheat to compensate for past weak inflation. Such looser policy, which is adverse for the dollar. However, the level of uncertainty is high.

Gold is on the back foot, trading around $1,920, amid fears the Fed will not deliver.

The Conference Board’s Consumer Confidence measure disappointed with a drop to 84.8 in August, indicating a more sluggish recovery. On the other hand, New Home Sales leaped above 900,000 annualized in July. The focus on Wednesday is July’s Durable Goods Orders, which carry expectations for an extended recovery.

See Durable Goods Orders July Preview: There is some catching up to do

Coronavirus vaccine hopes remain elevated with the University of Cambridge set to receive funding from the British government. President Donald Trump’s push toward a plasma treatment will probably hit a wall as it is yet to prove efficient. He will meet medical professionals late on Wednesday.

COVID-19 cases are surging in Europe, with Spain leading the increase. Governments are reluctant to slap new lockdowns, especially as cases are picked up earlier than in the first wave. The US case curve extends its downtrend, but deaths remain elevated.

Sino-American relations are at the backburner after negotiators from the world’s largest economies reported satisfaction from the latest trade review.

WTI oil prices are on the rise as a hurricane in the Gulf of Mexico is forcing the closure of refineries and production facilities in the region.

Cryptocurrencies are licking their wounds after falling on Tuesday with Bitcoin trading around $11,300, Ethereum capped below $400, and XRP below $0.28.


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