The Fight Against Inflation is Far from Over, Fed Officials say

　　

US stocks plunged on Monday, as the earnings season wrapped up and the threat of an economic recession still looming large amid warnings from Fed officials that the fight against inflation is far from over. That stance will likely be reinforced by Jerome Powell Friday at the prestigious event in Wyoming’s Grand Teton mountains, which has been used by Fed chairs as a venue for making key policy announcements. According to the latest MLIV Pulse Survey, stocks and bonds are set to tumble once more even though inflation has likely peaked, as rate hikes reawaken the great 2022 selloff. Many investors see the most destabilizing era f price pressures in decades eroding corporate margins and sending equities lower.

The benchmarks, both S&P500 and Dow Jones Industrial Average dropped on Monday, as equities saw their worst rout in two months after a surge drove S&P500 to its best start to a third-quarter since 1932. All sectors stayed in negative territory, as Consumer Discretion, Information Technology, and Communication service performed the worst among all groups, falling with 2.84%, 2.78%, and 2.67% on daily basis respectively for the day. The Nasdaq dropped 2.7% as big tech underperformed, Dow Jones Industrial Average fell 1.9%, and the MSCI world index plunged 1.8% on Monday.

Main Pairs Movement

The US dollar surged on Monday, as investors shied away from riskier assets amid growing fears that interest-rate hikes in the United States and Europe, aimed at curbing inflation, would weaken the global economy. The DXY index extended bullish momentum and edged higher, witnessing fresh transactions and surging to a level above 109.0 in the early US trading session.

The GBP/USD plunged and printed a fresh two-year low of 1.1742 on Monday, as strong greenback across the board and the vulnerable employment data have trimmed the confidence of the Bank of England in hiking interest rates. The cables have extended the selling pressure caused by the US dollar since last week and edged lower to a level below 1.177 by the end of the day. Meantime, EUR/USD fell to a level below 0.995, the lowest level since December 2002, as fears of the Eurozone recession escalated day by day. The pair dropped 0.94% on daily basis for the day.

Gold dropped and remained weighted at a one-month low, down for the seventh consecutive day, with the risk-aversion market mood supporting the US dollar ahead of the Jackson Hole meeting on Friday. Moreover, market fear of Russia’s Nord Stream 1 pipeline’s maintenance also supports the XAU/USD bears. The gold extended the bearish momentum and kept moving down to a level below $1,730 marks ahead of the US trading session, then rebounded to oscillate in a range from $1,735 to $1,740.

Economic Data

Currency	Data	Time (GMT + 8)	Forecast
EUR	German Manufacturing PMI (Aug)	15:30	48.2
GBP	Composite PMI	16:30	51.3
GBP	Manufacturing PMI	16:30	51.0
GBP	Services PMI	16:30	52.0
USD	New Home Sales (Jul)	22:00	575k