Much Is Riding On This Week In Setting The General Tone For Markets

It feels like a lot is riding on this week when it comes to setting the general tone for markets over the summer. The Fed tomorrow and although little is expected on policy, Chair Powell’s tone in the press conference will be key especially in light of the recent uptick in virus cases and the knock-on consequences. 
 
But perhaps some investors are starting to realize that the news of a Fed that is implicitly committed to keeping real yields low is not a new phenomenon and not such a new revelation.
 
Still, with the Feds holding the door wide open, I would expect FX traders will sell dollars aggressively, if the Fed dove is confirmed and then combined with cyclical US economic underperformance.
 
As we get into the brass tacks of the week, the main highlights will likely be the on Wednesday, along with a raft of earnings releases, including market leadership heavyweights Amazon (NASDAQ:), Apple (NASDAQ:), Alphabet (NASDAQ:), and Facebook (NASDAQ:). How much appetite traders have to add on risk is probably limited. But this is not a typical market, with so much health and economic headline risk, so best to keep on your toes, both positive and negative.

So far with FX volumes are 26 % above normal. Today it is proving to be dramatic curtain-raiser ahead of the FOMC tomorrow.

Silver

opened at $24.65 and barreled off to $25.60. When China’s retail market opened, immediately gapped up to $26.17, +6% from open, primarily driven by onshore Chinese demand. (Similar to )
 
The Shanghai Futures Silver Exchange immediately imposed a two-hour limit-up trading stop. Silver then leveled off for the next two hours, around $25.90. Once Shanghai reopened at 11.03 am, silver plummeted down to $24.15, 8% off the high. It is back near $24.75 now. The total lack of liquidity may have sidelined a considerable part of institutional interest. The risk-reward seems too uncertain for now.

Forex

There has been a bit of short-covering in G-10 and USD/Asians on the back of gold moves, after China H1 gold consumption was reported to have fallen off a cliff, Bloomberg reported right before the significant drop in .

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