July 3, 2021

Weekly Forex Market Recap: June 28 – July 2

 Despite the dip on Friday, the U.S. dollar was able to keep the top spot into the weekend on a string of net positive U.S. economic updates, as well as the delta variant concerns driving traders a bit more into safe havens.

Notable News & Economic Updates:

  • U.S. warplanes strike Iran-backed militia in Iraq, Syria
  • U.K. Health Secretary Sajid Javid is ‘lockdown skeptic’ and has vowed to end all restrictions on July 19
  • Delta variant prompts new travel restrictions across Europe
  • Ahead of talks, OPEC forecasts point to oil supply deficit in August
  • Lumber prices dive more than 40% in June, biggest monthly drop on record
  • Oil rises on lower U.S. stockpiles, demand recovery
  • U.S. dollar share of global reserves rises in Q1; euro share slips
  • JP Morgan Global Manufacturing PMI: Solid upturn in global manufacturing continues but stretched supply chains drive up costs
  • U.S. crude oil prices top $75 a barrel, the highest since 2018
  • Bets ramping up for lower Treasury yields in the second half of 2021
  • PMI data reveal widest UK-eurozone export divergence for 20 years in 2021
  • New Covid wave could be imminent as delta variant sweeps Europe, WHO says
  • 130 countries back global minimum corporate tax of 15%
  • New Covid wave could be imminent as delta variant sweeps Europe, WHO says
  • Delta variant sweeps Asia, prompting curbs as vaccination remains tepid
  • S&P 500 rises for a 7th straight day after strong jobs report, best winning streak in 10 months

Intermarket Weekly Recap

With the always anticipated U.S. jobs data on Friday and no other major economic catalysts on the schedule, most of the trading week was relatively quiet across the financial markets.

Equities were steadily higher, not affected by the rising concerns of the covid-19 Delta variant put on some other assets, including bond yields and higher-yielding, commodity currencies. Oil was also under pressure earlier in the week, likely on idea that the Delta variant could impact the rising demand from the pandemic recovery, outweighing concerns of a oil supply deficit.  Oil was able to recover later in the week after confirmation from U.S. data of lower inventory and higher demand sparked speculation that OPEC+ may increase future output.

The crypto markets were moving as always, albeit with a little less volatility than usual. Bitcoin bounced once again off the major support area forming around the $32K with no major bullish news to speak off.  But like the previous weeks, BTC saw selling pressure quickly (this time around the $36K handle), possibly on a few headlines concerning Binance exchange (e.g., UK financial watchdog bans crypto exchange Binance, Binance crypto exchange faces scrutiny in Thailand, Caymans).

In the forex space, price action was relatively calm with no major catalysts until the Friday’s NFP report. Broad performance seemed to indicate that global risk sentiment was the main driver among the major currencies, typically characterized by an out performance in the “safe havens” over the “riskier” currencies like the comdolls. We can also see it in the Canada dollar when it out performs the Kiwi and Aussie while underperforming the rest of the majors.

Sentiment became uniform on Friday though after the latest U.S. employment update, where we saw the U.S. beat the net change expectations but saw a rise in the unemployment rate. This seems to have sparked a risk-on sentiment move across the major currencies as the Dollar dropped after the news, possibly on the idea that the jobs report wasn’t likely strong enough for the Fed to speed up their tapering/rate hike timeline.

USD Pairs

  • Strong all week, strong economic updates, maybe some risk-off flows off of delta variant fears,
  • McConnell demands infrastructure de-linked from fast-track bill
  • Fed Vice Chair Quarles casts significant doubt on establishing a digital dollar
  • U.S. home prices rose in April at fastest pace in 15 years – S&P/Case-Shiller
  • U.S. consumer confidence at 16-month high; house price inflation heating up
  • Fed’s Waller: 2022 rate hike possible, wants MBS taper first
  • U.S. Private payrolls rise 692,000 in June, easily topping expectations
  • U.S. pending home sales increase to highest reading for May since 2005
  • Fed’s Kaplan says he wants taper to start ‘soon,’ be gradual
  • U.S. Weekly jobless claims total hits new pandemic-era low of 364,000
  • U.S. manufacturing sector grows moderately; prices paid at record high – ISM
  • U.S. job growth picks up in June; unemployment rate rises to 5.9%
  • U.S. factory orders rebound strongly in May

GBP Pairs

  • Net winner all week, optimism over lockdown ending? economic data was mixed
  • U.K. Health Secretary Sajid Javid is ‘lockdown skeptic’ and has vowed to end all restrictions on July 19
  • UK house prices rise at fastest rate since 2004 amid stamp duty rush
  • UK mortgage approvals rise by record 827% as stamp duty holiday deadline looms
  • Bank of England’s Andy Haldane voices 4% inflation fear
  • UK shop prices continue to fall in June: BRC
  • Surprise 1.6% shrink in UK GDP for Q1 2021
  • UK manufacturing sees input costs and selling prices rise at record rates in June
  • BoE’s Bailey: don’t over-react to temporary jump in inflation

EUR Pairs

  • Mixed but arguably a net out performance, possibly with the help of positive European economic updates. Weak against JPY & USD, possibly on covid concerns.
  • Emergency ECB stimulus could end next March: Holzmann
  • German Inflation rate expected to be +2.3% m/m in June 2021
  • In June 2021, French consumer prices increased by +1.5% y/y
  • France household consumption expenditure on goods bounced back sharply in May 2021 (+10.4%)
  • Eurozone inflation drops below 2% in ‘temporary’ dip
  • German retail sales up 4.2% vs. 4.5% forecast, previous 5.5% drop
  • Eurozone manufacturing PMI sets fresh record high in June at 63.4
  • Italy Unemployment Rate at 10.5% in May vs. 10.7% in April
  • Euro zone recovery faces risks from virus mutations, ECB’s Lagarde says
  • Spanish unemployment fell by 166,911 people in June
  • Industrial producer prices up by 1.3% y/y in the euro area and by 1.4% y/y in the EU in May 2021

CHF Pairs

  • very mixed price action, but mostly underperformed other safe havens most of the week, vice versa vs. comdolls
  • Swiss KOF Economic Barometer: 133.37 in June vs. 143.75 in May
  • Swiss CPI at 0.1% vs. 0.2% forecast, 0.3% previous
  • Swiss retail sales increased by 2.8% vs. projected 17.5% jump
  • Swiss PMI June 2021: Dynamic recovery also in the service sector

CAD Pairs

  • Canadian real gross domestic product (GDP) contracted 0.3% in April after 11 consecutive monthly increases.
  • In May, Canada’s merchandise trade balance moved from a surplus of $462M in April to a deficit of $1.4B in May.
  • The total value of building permits in Canada dropped a record $1.6B (-14.8%) to $9.5B in May.
  • Canadian Manufacturing growth softens to four-month low, but remains solid

NZD Pairs

  • RBNZ head Orr: New Zealand returning to pre-pandemic levels
  • ANZ NZ business outlook: inflation pressures remain, retail pricing intensions soared
  • ANZ-Roy Morgan New Zealand consumer confidence virtually unchanged in June

AUD Pairs

  • Tech, banks drag Australia shares lower as states enter lockdown
  • Commodity prices in Australia rose by 49.1% y/y after earlier 40.7% figure
  • Australian job vacancies reach record highs as employers struggle to get workers
  • Australia shrugs off China snub with record exports
  • Australia’s Scott Morrison announces new roadmap to get Australia out of lockdown
  • Australia to halve arrivals from overseas, offers COVID-19 exit roadmap

JPY Pairs

  • BOJ was confident in June meeting of recovery as vaccination proceeds
  • Japanese jobless rate up from 2.8% to 3.0% vs. 2.9% forecast
  • Japan’s retail sales slip from 11.9% to 8.2% as expected
  • Japan’s May factory output records biggest drop in a year
  • Bank of Japan cuts some bond purchase targets over the next quarter
  • Japan Housing starts rise by 9.9% in May vs. a 7.1% rise in April 2021
  • Japan Consumer Confidence Index (seasonally adjusted) in June 2021 was 37.4, +3.3 from the previous month.
  • Japanese Tankan manufacturing index up from 5 to 14 in Q2
  • Japanese Tankan non-manufacturing index recovered from -1 to +1