Dollar Pulls Back as Evergrande Fears Moderate, Crypto Remains Depressed

This is what you need to know to trade today Tuesday, September 21:

Some calm has returned to the markets early Tuesday after Monday’s massive Evergrande-related selloff. The dollar is off the highs across the board. Uncertainty over Chinese policy prevails and joins tensions ahead of the Fed’s decision on Wednesday. Canadian Prime Minister Trudeau has been re-elected and crypto remains depressed.

EvergrandeChina’s second-largest real estate company remains in dire financial distress, but a growing chorus of banks like Barclays, UBS and Citi say this is not a Lehman Brothers time for the world’s second-largest economy . While Evergrande will likely not make another debt payment and even sink, markets appear less fearful of contagion to the broader Chinese economy and the global economy.

S&P 500 futures point to a rebound after Monday’s 1.7% drop, the worst since May. The safe-haven dollar is far from the highs, with EUR / USD bouncing from 1.17 and GBP / USD approaching 1.37 once again. Gold is changing hands above $ 1,760, rebounding from lows as 10-year US Treasury yields cool.

China remains on vacation Tuesday, with all eyes on the People’s Bank of China meeting (PBOC) on Wednesday, in which the next steps of the Evergrande drama will be critical.

The Federal Reserve It begins its two-day meeting on Tuesday and is scheduled to announce no imminent policy changes on Wednesday. Softer inflation and a disappointing employment report will likely deter Fed Chairman Jerome Powell and his colleagues from announcing the reduction of the bank’s $ 120 billion a month bond purchase plan.

Nevertheless, Powell could signal a move coming later this year, despite concerns about the virus, Evergrande and supply chain issues. The Fed chairman can soften such a signal by publicizing the process.

See Fed Preview: Three Ways Powell Could Lower the Dollar, And None Are Projections

Canadian Prime Minister Justin Trudeau won re-election, but he did not achieve an absolute majority. USD / CAD is trading below 1.28, falling from the highs in a move related more to waning Evergrande concerns than anything else.

The United States will open its doors to vaccinated travelers from Europe and other countries starting in November, a step that points to a sign of a return to normalcy. COVID-19 cases are declining in the United States, but remain above the levels recorded in Europe.

The cryptocurrencies have not been recovered from the sale related to Evergrande. One reason is information that SEC Commissioner Gary Gensler is ready to enact a hard line against digital assets. Bitcoin is trading below $ 43,000, Ethereum is struggling around $ 3,000, and Ada is around $ 2.10.

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