US Covid Cases Hit Peak?
It's now abundantly clear that this wave of covid cases will have a detrimental effect on the US economy, particularly with supplementary employment benefits set to expire in two weeks. A sign of the shifting sands at the Fed came on Friday as Dallas Fed President Kaplan – who was one of the first to call for a September taper – said delta is limiting production and slowing a return to the office. He highlighted the negative trend and said he may have to adjust his view by the time the Sept FOMC rolls around.
His comments helped to turn sentiment in equities but there's also growing evidence that the US is near a peak in infections. The seven-day average of cases today is 151K, up from 129K a week ago. That's a slowdown in the rise. Moreover, Florida cases are now down week-over-week (with the caveat that data from that state is messy). Importantly, Trump urged supporters to get vaccinated on the weekend and the US boosted its vaccination pace to 1 million for three straight days, with about half of those receiving a first dose.
The price action in global FX last week certainly highlighted fears about covid, delta and whatever variant comes next. On Friday, however, there were signs of a reversal in equities and hard-hit CAD. US Treasuries are also showing no sign of fresh fears.For Monday's trade, the data points to watch will be the Markit August US PMIs. They're solid forward-looking indicators and may offer clues on how businesses are handling the virus impacts.
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