Dollar remains muted after Friday’s pullback

The delta wave uncertainty forced Federal Reserve Chairman Jerome Powell to play it safe during Friday’s Jackson Hole symposium, setting no timeline and expressing no rush for winding down stimulus despite flagging that bond tapering will start this year.

His dovish remarks sent the dollar index lower but within the 92.00 territory as the euro and the pound found the chance to steal some ground on the news.

ECB's Villeroy signals PEPP reduction, but the euro does not care

On Monday, the dovish European Central Bank Governing Council member François Villeroy attempted to add more support under the euro, admitting that favorable economic conditions in the bloc should be considered when deciding on the pace of PEPP next week, hinting at a potential slowdown in asset purchases.

Yet, he quickly underlined that any adjustments would not amount to tapering, with euro/dollar remaining stuck around its 50-day simple moving average and the 1.1800 level in the aftermath. For now, the narrative is that the ECB cannot compete with the Fed in monetary tightening, and it could only start the tightening procedures months or even years after the Fed begins to reduce stimulus, keeping the euro at a disadvantageous position in the sessions ahead.

Nonfarm payrolls the highlight of the week

Still, some volatility cannot be excluded at the end of the week, when US nonfarm payrolls for the month of August come into light. Last week, Atlanta Fed president Raphael Bostic claimed that “if August job gains match those in June and July", it would be reasonable to trim bond purchases in October. Hence, the NFP report will attract significant attention, and should it surprise to the upside as July’s one did, it would be interesting to see if dollar/yen can become more energetic above the 110.00 level.

On the other hand, dollar/franc met some strong dip-buying around the key 0.9100 level today, becoming one of the best performers of the day along with euro/franc and pound/franc.

Meanwhile, pound/dollar traded marginally below Friday’s high of 1.3780 in the absence of any market teasers. The antipodeans were trading at a slower pace on Monday, but they could become more active in the face of China’s Manufacturing PMI due early on Tuesday.

Wall Street trades positive; China’s regulatory crackdown weighs

Turning to stocks, Powell’s dovish stance bodes well for US indices, extending the record rally to uncharted waters once again. Wall street started the day in the green today, though China’s move to cut gaming time for players under the age of 18 to an hour on Fridays, weekends, and holidays, weighed on stock trading both in the US and Europe. The pan-European STOXX 600 is set to close neutral on the day.

Commodities

In commodity news, sources reported OPEC oil producers will follow the script by raising output by 400k bpd starting from September when they meet this Wednesday. WTI oil futures inched to an intra-day high of $69.59 before pulling slightly down.

In metals, gold is maintaining a neutral trajectory although it’s holding above 1,800 post-Jackson Hole. A bounce above 1,835 could put the precious metal on an upward path in the short-term picture. Note that the US is planning to remove most of its troops from Afghanistan later today. That said, the Afghan story has had little affect on safe havens so far. Therefore, any military clashes may not shake markets.