Volatility risk seems to be on the rise, with the VIX ‘fear gauge’ having just come off its largest surge over a week since the end of February. Most benchmark stock indexes around the world, such as the Dow Jones, FTSE 100 and Nikkei 225, wrapped up a negative week. This allowed for the haven-linked US Dollar and Japanese Yen to recover some lost ground.
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Risk appetite notably waned in the aftermath of the Federal Reserve rate decision as Chair Jerome Powell arguably cooled robust economic recovery bets. Meanwhile, coronavirus cases in states like California and Texas picked up following protests and riots after the killing of George Floyd. Growth-linked crude oil prices suffered as gold remained in directionless trade.
The week ahead is filled with fundamental event risk. The Yen eyes the Bank of Japan, the British Pound awaits the Bank of England and the Swiss Franc turns to the Swiss National Bank. Central banks from developing nations such as Russia and Brazil. Mr Powell is also presenting the semi-annual monetary policy report before the Senate Banking Committee.
Outside of central banks, all eyes turn to retail sales data from the world’s largest economy, where consumption is about two-thirds of GDP. Crude oil will be awaiting the monthly report from the Organization of the Petroleum Exporting Countries (OPEC). This is as nations continue relaxing lockdown measures, perhaps raising the risk of another wave of the coronavirus.
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US DOLLAR WEEKLY PERFORMANCE AGAINST CURRENCIES AND GOLD