Since my last column in mid-August, the US dollar index has slipped to near two-year lows. After initially picking up bids towards the end of the first quarter, which coincided with the start of the pandemic, the dollar has since sunk to as low as 91.75 after a four-month slide from May to August saw the greenback shed close to 7.5 per cent.
This dollar weakness saw other currency and commodity markets hit multi-year highs in this period. Gold for immediate delivery famously hit a record high at $2,075 last month, while the EUR/USD similarly traded above 1.20 levels for the first time in nearly two years.
After hitting a low of 1.1410 on March 20, the GBP/USD hit as high as 1.3480 on September 1 – an incredible 18 per cent move in six months. With such a sustained period of dollar weakness, I feel we are approaching a critical juncture for the greenback.
With such a sustained period of dollar weakness, I feel we are approaching a critical juncture for the greenback
The past six months have coincided with massive easing measures from the Federal Reserve. During this period, the central bank has injected more than $3 trillion (Dh11tn) to prop up an ailing US economy – taking the total Fed balance sheet to 1.7x its size compared with just six months ago.
Markets lapped up the record easing measures – yields on US Treasuries were in control, US stock markets whipsawed to post record highs and the dollar remained under pressure. While these Fed measures could have longer-term impacts on the value of the dollar, in the near term, I expect to see a correction in favour of the greenback.
As the Fed has played its hand, focus will turn to other global central banks who may be forced to act. If we focus on the Euro area, this could prove to be a pivotal week for the USD against the euro. While we can expect to see no changes at the European Central Bank’s rate decision on Thursday, markets could perhaps be positioning themselves for hints to further easing measures from the ECB.
As we enter into the heart of autumn, coronavirus cases are on the rise once again and this will no doubt cramp economic productivity, which the ECB will be vigilant to address. When looking at the seven-day rolling averages across Europe, France and Italy combined have, on average, a daily infection rate five times higher than one month ago, while Spain is reporting 2.5 times the daily cases compared to a month ago. And we are seeing this translate into the euro data docket.
Last week’s Euro area services PMI print showed a weaker expansion in the services sector, while job losses were recorded for a sixth straight month. This has seen EUR/USD move back down towards 1.18 levels, where the pair currently finds itself consolidating.
While I feel euro traders are largely pricing in the potential for further easing from Christine Lagarde and the ECB, I expect further downsides towards 1.1720 in the next two weeks. September 14 sees the release of Euro area industrial production (previously -12.3 per cent) and this is followed by the ZEW economic sentiment on September 15.
Coupled with both manufacturing and services PMI on September 23, these data points will spark interest in Euro bears through the end of the month. While things are quick to change in the current market climate, I expect to see 1.17 levels holding for the euro and maintain 1.1950/1.20 as a strong ceiling, which will not be breached for the next two months.
Looking at the other star performer of the summer months – sterling easily achieved my 1.32 target given back on August 12. However, it is now set to come under a bit of pressure with the renewal of round eight of Brexit negotiations this week. Markets were caught by surprise this week when Prime Minister Boris Johnson threatened to override the EU's withdrawal agreement and jeopardised trade talks, as reported by the Financial Times. The newspaper reported that Mr Johnson's government will release a bill later today, which will, in effect, "eliminate the legal force of parts of the withdrawal agreement".
Continue to watch for developments this week, which should see GBP/USD testing 1.30 in the week ahead.
And finally, gold has settled after a tumultuous August. The precious metal is firmly trading in the mid-$1,900 range. My downside target of $1,905 given last month was achieved and I see this as a strong support level going forward for the precious metal. For short-term traders looking for an opportunity, long positions at $1,910 or below could prove fruitful in the near term.
Gaurav Kashyap is a market strategist at Equiti Global Markets. The views and opinions expressed in this article are those of the author and do not reflect the views of Equiti
GIANT REVIEW
Starring: Amir El-Masry, Pierce Brosnan
Director: Athale
Rating: 4/5
Company info
Company name: Entrupy
Co-founders: Vidyuth Srinivasan, co-founder/chief executive, Ashlesh Sharma, co-founder/chief technology officer, Lakshmi Subramanian, co-founder/chief scientist
Based: New York, New York
Sector/About: Entrupy is a hardware-enabled SaaS company whose mission is to protect businesses, borders and consumers from transactions involving counterfeit goods.
Initial investment/Investors: Entrupy secured a $2.6m Series A funding round in 2017. The round was led by Tokyo-based Digital Garage and Daiwa Securities Group's jointly established venture arm, DG Lab Fund I Investment Limited Partnership, along with Zach Coelius.
Total customers: Entrupy’s customers include hundreds of secondary resellers, marketplaces and other retail organisations around the world. They are also testing with shipping companies as well as customs agencies to stop fake items from reaching the market in the first place.
Company profile
Company: Verity
Date started: May 2021
Founders: Kamal Al-Samarrai, Dina Shoman and Omar Al Sharif
Based: Dubai
Sector: FinTech
Size: four team members
Stage: Intially bootstrapped but recently closed its first pre-seed round of $800,000
Investors: Wamda, VentureSouq, Beyond Capital and regional angel investors
The specs: 2018 Nissan 370Z Nismo
The specs: 2018 Nissan 370Z Nismo
Price, base / as tested: Dh182,178
Engine: 3.7-litre V6
Power: 350hp @ 7,400rpm
Torque: 374Nm @ 5,200rpm
Transmission: Seven-speed automatic
Fuel consumption, combined: 10.5L / 100km
COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
MATCH INFO
Rugby World Cup (all times UAE)
Final: England v South Africa, Saturday, 1pm
The specs
Engine: 4.0-litre V8 twin-turbocharged and three electric motors
Power: Combined output 920hp
Torque: 730Nm at 4,000-7,000rpm
Transmission: 8-speed dual-clutch automatic
Fuel consumption: 11.2L/100km
On sale: Now, deliveries expected later in 2025
Price: expected to start at Dh1,432,000
Tips to keep your car cool
- Place a sun reflector in your windshield when not driving
- Park in shaded or covered areas
- Add tint to windows
- Wrap your car to change the exterior colour
- Pick light interiors - choose colours such as beige and cream for seats and dashboard furniture
- Avoid leather interiors as these absorb more heat
Groom and Two Brides
Director: Elie Semaan
Starring: Abdullah Boushehri, Laila Abdallah, Lulwa Almulla
Rating: 3/5
MOUNTAINHEAD REVIEW
Starring: Ramy Youssef, Steve Carell, Jason Schwartzman
Director: Jesse Armstrong
Rating: 3.5/5
TRAP
Starring: Josh Hartnett, Saleka Shyamalan, Ariel Donaghue
Director: M Night Shyamalan
Rating: 3/5
Zayed Sustainability Prize
Results
2.30pm: Handicap (PA) Dh40,000 1,700m; Winner: AF Mezmar, Adam McLean (jockey), Ernst Oertel (trainer).
3pm: Maiden (PA) Dh40,000 2,000m; Winner: AF Ajwad, Tadhg O’Shea, Ernst Oertel.
3.30pm: Handicap (PA) Dh40,000 1,200m; Winner: Gold Silver, Sam Hitchcott, Ibrahim Aseel.
4pm: Maiden (PA) Dh40,000 1,000m; Winner: Atrash, Richard Mullen, Ana Mendez.
4.30pm: Gulf Cup Prestige (PA) Dh150,000 1,700m; Winner: AF Momtaz, Saif Al Balushi, Musabah Al Muhairi.
5pm: Handicap (TB) Dh40,000 1,200m; Winner: Al Mushtashar, Richard Mullen, Satish Seemar.
TOUR RESULTS AND FIXTURES
June 3: NZ Provincial Barbarians 7 Lions 13
June 7: Blues 22 Lions 16
June 10: Crusaders 3 Lions 12
June 13: Highlanders 23 Lions 22
June 17: Maori All Blacks 10 Lions 32
June 20: Chiefs 6 Lions 34
June 24: New Zealand 30 Lions 15 (First Test)
June 27: Hurricanes 31 Lions 31
July 1: New Zealand 21 Lions 24 (Second Test)
July 8: New Zealand v Lions (Third Test) - kick-off 11.30am (UAE)
Islamophobia definition
A widely accepted definition was made by the All Party Parliamentary Group on British Muslims in 2019: “Islamophobia is rooted in racism and is a type of racism that targets expressions of Muslimness or perceived Muslimness.” It further defines it as “inciting hatred or violence against Muslims”.
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T20 WORLD CUP QUALIFIERS
Qualifier A, Muscat
(All matches to be streamed live on icc.tv)
Fixtures
Friday, February 18: 10am Oman v Nepal, Canada v Philippines; 2pm Ireland v UAE, Germany v Bahrain
Saturday, February 19: 10am Oman v Canada, Nepal v Philippines; 2pm UAE v Germany, Ireland v Bahrain
Monday, February 21: 10am Ireland v Germany, UAE v Bahrain; 2pm Nepal v Canada, Oman v Philippines
Tuesday, February 22: 2pm Semi-finals
Thursday, February 24: 2pm Final
UAE squad:Ahmed Raza(captain), Muhammad Waseem, Chirag Suri, Vriitya Aravind, Rohan Mustafa, Kashif Daud, Zahoor Khan, Alishan Sharafu, Raja Akifullah, Karthik Meiyappan, Junaid Siddique, Basil Hameed, Zafar Farid, Mohammed Boota, Mohammed Usman, Rahul Bhatia
The specs: 2018 Chevrolet Trailblazer
Price, base / as tested Dh99,000 / Dh132,000
Engine 3.6L V6
Transmission: Six-speed automatic
Power 275hp @ 6,000rpm
Torque 350Nm @ 3,700rpm
Fuel economy combined 12.2L / 100km
1971: The Year The Music Changed Everything
Director: Asif Kapadia
4/5
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