Dollar Bounces Back; Gold Retreats Ahead of Yellen Speech

The U.S. Dollar bounced back on Thursday but remained range bound for the week on foreign currency position squaring ahead of a summit of central bankers in Jackson Hole, Wyoming.

Friday is the key day for many investors because that is the day Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi are scheduled to deliver speeches. Although both are expected to stay on script and reveal nothing that could shake up the markets, the current price action suggests investors may be bracing for news on further U.S. rate hikes, the timing of its balance sheet tapering and if Europe is looking to curtail stimulus.

Yellen will deliver her speech at 1400 GMT and Draghi will speak at 1900 GMT.

On Thursday, investors’ focus shifted from geopolitics and political turmoil in Washington to the central bankers’ symposium in Jackson Hole and monetary policy.

Although the theme of the Jackson Hole Conference this year is ‘fostering a dynamic global economy’, speculators bought the dollar as a precaution just in case Draghi and Yellen drop hints about future plans.

U.S. Economic Reports

It was another light day as far as reports were concerned. U.S. Weekly Unemployment Claims came in at 234K, slightly below the 237K estimate, and a little higher than last week’s figure.

Existing Home Sales unexpectedly fell in July to their lowest monthly level of the year due to a lack of properties for sale, which also continued to push up prices.

The National Association of Realtors said on Thursday existing home sales fell 1.3 percent to a seasonally adjusted annual rate of 5.44 million units last month. June’s sales pace was revised slightly lower to 5.51 million units.

Economists were predicting a rise of 0.9 percent to a rate of 5.57 million units. Sales were up 2.1 percent from July 2016. Supply was down 9.0 percent from a year ago. Housing inventory has declined for 26 consecutive months on a year-on-year basis.

Gold

Gold prices eased on Thursday, weakened by the firmer U.S. Dollar as investors awaited clues on further interest rate hikes from Fed Chair Janet Yellen and the possibility of a reduction of stimulus from ECB President Mario Draghi at the central bankers’ conference in Jackson Hole, Wyoming on Friday.

Helping to support the market were political and geopolitical risks. Investors are still digesting the threat by U.S. President Trump to shut down the government unless he got funding for a border wall with Mexico.

Crude Oil

Crude oil prices tumbled on Thursday, while gasoline futures surged nearly 3 percent in reaction to the possibility of refinery outages on the U.S. Gulf Coast. Traders were buying refined products such as gasoline and selling crude oil, the primary feedstock at refineries. This move is known as crack-spread buying.

Traders are watching Harvey, a Category 1 hurricane, with 85 mph winds. According to reports, it could strengthen to a Category 3 hurricane with winds of at least 111 mph, which could send the price of gasoline up over 25 cents per barrel.

It’s a temporary event that could play with the inventories numbers for the next week or so.