The Japanese yen was the biggest loser while the Kiwi took the top spot among the major currencies as positive risk sentiment seemed to be the main market driver this week.
Notable News & Economic Updates:
- China’s renewed crypto crackdown wipes $400 billion off the market as bitcoin slides
- Oil rallies on Monday on weaker dollar and Iran supply uncertainty
- Powell: Fed will not hike based on inflation fears alone
- Oil futures settle with a loss, pressured by speculation that OPEC+ will agree to more output hikes
- Fed officials say “temporary” inflation surge may last longer than thought
- Bank of Korea May Raise Rates This Year, Governor Says
- Mexico’s central bank delivers own ‘hawkish surprise’ with rate hike
- BOE warns against tightening too soon as inflation surges
- U.S. consumer prices surge again as PCE inflation gauge hits highest annual rate since 2008
- Delta Covid variant has a new mutation called ‘delta plus’: Here’s what you need to know
- S&P 500 climbs to another record on Friday led by bank shares, notches its best week since February
Risk-on Sentiment
Dollar, Gold, S&P 500, 10-yr Treasury Yield, Bitcoin, OilDollar, Gold, S&P 500, 10-yr Treasury Yield, Bitcoin, Oil
On the intermarket chart above, we can see a general positive lean in the markets this week, characterized by rising equities, bond yields, and commodities against a weaker U.S. dollar and falling bond prices. The only outlier market was the crypto market, once again in turmoil early in the week on news that the Chinese government ordered a shutdown of bitcoin miners and for financial institutions to refuse service for crypto related activities.
It’s likely the reason for the bullish lean in the markets was a combination of a few stories. First, Fed Chair Powell and other central bankers reassured traders that the spike in inflation is transitory and that monetary policy tightening is not likely to come sooner.
Second, traders may have possibly positioned long equities and commodities in anticipation of a massive infrastructure deal, which seems to be moving forward for now.
And third, we just saw another round of business sentiment data from around the globe (e.g., U.S. factory activity index rises to record high in June, Eurozone economy grows at fastest rate for 15 years, etc.) indicating a continued strong recovery ahead from the global pandemic.
This meant the usual risk-on picture for the major currenciesas the Comdolls took the top spots this week, while “safe havens” were the big laggards. The Japanese yen was the biggest loser, likely with the help of slowing PMI data, while the Kiwi dollar took the top spot with the help of positive trade and consumer data.
USD Pairs
- NY Fed’s Williams: Economic conditions have not progressed enough for central bank to shift stance
- Powell: Fed will not hike based on inflation fears alone
- Fed’s Mester says framework needs to be more explicit on financial stability
- Fed’s Daly says could get to taper threshold late this year
- U.S. factory activity index rises to record high in June – Markit
- U.S. new home sales tumble to one-year low as prices soar
- Fed’s Bostic sees 2022 rate liftoff, taper call in a few months
- Fed’s Rosengren says central bank needs to keep eye on financial stability risks
- A bipartisan infrastructure plan has a breakthrough in Congress
- Yellen says inflation should be lower than current levels by year end
- U.S. weekly jobless claims fall; first quarter GDP unrevised at 6.4%
- Consumer sentiment in the U.S. increases by less than forecast
- Fed’s Kashkari says inflation will be temporary, workers will return
GBP Pairs
- U.K. Employment growth hits record high amid sharply rising workloads, but inflationary pressures also strengthen
- Inflation builds as U.K. economy keeps up recovery momentum
- Sterling slides after Bank of England holds policy steady, hints at inflation concerns
- BOE says home renters hit by pandemic could pose risk to U.K.
- The UK’s Covid vaccine program and delta surge means it’s now a test case for the world
EUR Pairs
- German flash manufacturing PMI up from 64.4 to 64.9
- Eurozone economy grows at fastest rate for 15 years – IHS Markit Flash Eurozone PMI
- Lagarde sees limited U.S. inflation spillovers to Euro area
- French business confidence at 14-year high in June
- German consumers’ economic optimism reaches ten-year high: GfK
- Annual growth rate of broad monetary aggregate M3 decreased to 8.4% in May 2021 from 9.2% in April
- Largarde tells EU leaders they must ‘water the green shoots’
- Europe braces for surge in Delta variant
CHF Pairs
- Blockchain not suitable for CBDC, says Swiss national bank economist
- Cash loses its shine in pandemic but still king in Switzerland
Swiss Nation Bank Quarterly Bulletin
CAD Pairs
- Inflation overshoot has Bank of Canada weighing mandate tweaks
- Bank of Canada to break sequence of lower terminal rates as governments splurge
- Canadian retail sales slide in April, May as COVID-19 shutdown bites
NZD Pairs
- New Zealand consumer confidence rises in Q2
- New Zealand credit card spending growth at 11-month high
- New Zealand May Trade Balance was a surplus of NZ $469M y/y
AUD Pairs
- Australia’s retail sales up by 0.1% vs. projected 0.4% gain
- Australia’s goods trade surplus widened from 9.67B AUD to 13.32B AUD
- Australia’s Private sector output growth remains strong, but slows amid virus uncertainties and supply constraints
- Pandemic is not over’: RBA’s Ellis
- RBA rate hike likely in November 2022
JPY Pairs
- Japanese flash manufacturing PMI down from 53.0 to 51.5
- Tokyo core CPI stayed flat instead of dipping by 0.1% as expected
