Rising pandemic conditions and peaking global growth sentiment was the market driver of the week, prompting traders to run to risk assets right from the start.
The Greenback took the crown as expected in risk-off environments, while the Kiwi and Aussie dollars were the hardest hit as their respective countries go into strict COVID lockdowns
Notable News & Economic Updates:
- China economy under pressure as factory output, retail sales growth slow sharply
- Japan extends, expands coronavirus emergency as cases surge
- ‘We are on fire’: Five U.S. states set new records for Covid cases as hospitalizations rise
- Automobile shortages, spending shift to services tank U.S. retail sales
- New Zealand’s Prime Minister Jacinda Ardern locks down nation over single Covid case
- Southeast Asia battles world’s highest Covid-19 deaths
- Just a blip? UK inflation slows more sharply than expected
- New Zealand delays rate hike amid COVID-19 outbreak, flags tightening before yr-end
- The Fed is worried the rise of stablecoins could impact financial stability
- Oil heads for 7% weekly drop as Delta variant spreads
- New Zealand PM Ardern extends nationwide COVID-19 lockdown
- Coinbase Is Adding $500 Million of Crypto to Its Balance Sheet: CEO Brian Armstrong
- UK July retail sales drop amid soccer frenzy and COVID ‘pingdemic’
- Dow rebounds more than 200 points on Friday, but closes out a losing week
- As Covid-19 hospitalizations increase, a greater number of Americans are deciding to get vaccinated
Intermarket Weekly Recap
There weren’t many breaking new developments on the economic and policy front, which is likely why traders seemed to have focused on global risk sentiment this week. As usual since the start of the pandemic, covid-19 developments were likely the main driver, and this week was pretty negative as the uptrend in cases continued around many parts of the globe.
This of course raises the expectations of a global growth slow down, which seemed to have been confirmed this week with disappointing economic numbers from China on Monday and the U.S. on Tuesday, as well as rising lockdown protocols enacted this week to contain the spread of covid-19.
The usual risk-on assets classes turn red right at the start of the week, while the safe havens like the U.S. dollar and gold prices closed in the green on Monday. U.S. equities was an outlier from the broad risk aversion moves, likely finding bids on expectations of positive earnings data coming later in the week.
Risk sentiment leaned a bit more negative on Wednesday after the latest FOMC meeting minutes reinforced the notion of a Fed taper before the end of this year. This correlates with a quick move lower in the usual risk assets (e.g., equities, oil, and crypto) from Wednesday through the Thursday U.S. trading session. But by Friday, it looked like traders may have changed their biases a bit on that front as a continued slow down in global growth would decrease the odds of a taper this year.
In the forex space, we saw the typical currency patterns seen in a risk aversion environment; the comdolls took hard hits to the chin while the “safe havens” outperformed. The weakness in the Kiwi and Aussie were likely accelerated by covid lockdowns in both Australia and New Zealand, the Kiwi taking a bigger hit after the RBNZ postponed their highly anticipated rate hike.
USD Pairs
- N.Y. Fed’s Empire State manufacturing business index declines in August
- Fed’s Eric Rosengren backs tapering in the fall but no rate hikes until job market improves
- U.S. Retail sales drop worse-than-expected 1.1% in July as rising Covid fears hit consumers
- U.S. Homebuilder sentiment falls to lowest level in over a year as buyers face sticker shock
- Fed’s Powell: Not certain Delta outbreak will dent recovery
- U.S. manufacturing production accelerates on autos in July
- Fed’s Kashkari: ‘Reasonable’ to taper late this year or early next
- U.S. mortgage applications drop as mortgage rates edge above 3% -MBA
- Bullard: Misreading inflation could require “very disruptive” rate hikes
- Federal Reserve preparing for taper this year, July minutes show
GBP Pairs
- U.K. House prices cooling at top end of market – Rightmove
- UK payrolls move closer to pre-pandemic level – ONS
- UK unemployment falls amid record rise in job vacancies
- UK payroll employees showed monthly increase, up +182K to 28.9M in July 2021
- UK inflation slows down to 2% in temporary blip
- Spending on UK cards dips to 94% of pre-pandemic level
- U.K. retail sales slumped 2.5% vs. projected 0.2% uptick
EUR Pairs
- GDP up by 2.0% and employment up by 0.5% in the euro area
- Germany reports highest daily increase in COVID-19 cases in nearly three months
- Annual inflation up to 2.2% in the euro area; Up to 2.5% in the EU
- Production in construction down by 1.7% in euro area and by 1.2% in EU; Up by 2.8% and 3.5% compared with June 2020
- Current account recorded €22B surplus in June 2021, up from €14B in previous month
CHF Pairs
- Swiss exports increases in July
CAD Pairs
- Statistics Canada says manufacturing sales rose in June, while wholesale sales fell
- Canadian housing starts trended lower in July
- Canada’s annual inflation rate in July accelerates to 3.7%, fastest since 2011
- Canada adds jobs in July, led by service providing sectors – ADP
NZD Pairs
- New Zealand Services Index Ebbs In July – BusinessNZ
- New Zealand announces it’s locking down the entire country … over one Covid case
- Global dairy prices: +0.3% increase since last auction
- RBNZ kept interest rates on hold vs. projected hike to 0.50%
- New Zealand extends lockdown to August 24, 11 new cases reported
AUD Pairs
- Australia extends lockdown in Melbourne for two more weeks
- Minutes: RBA “prepared to act” if virus spread sets back Australia recovery
- The wage price index (WPI) in Australia grew at a moderate pace of 1.7% year-on-year during the second quarter of 2021
- Australia unemployment falls, but distorted by lockdowns
JPY Pairs
- Japanese industrial production upgraded from 6.2% to 6.5% in July
- Japan Tertiary Industry Activity at 97.2, +2.9% y/y
- Japan’s factory mood hits 3-1/2-year high – Reuters Tankan
- Japanese national core CPI down 0.2% vs. projected 0.4% drop
- Japan sees record number of Covid cases days before Paralympics begin
