Weekly Forex Market Recap: Aug. 30 – Sept. 3

 Traders were leaning risk-on in a relatively quiet week, prompting risk currencies to outperform against the safe havens.

The Kiwi took the top spot with the help of easing covid restrictions in New Zealand, while the Swiss franc was all red, likely on global risk sentiment and negative economic updates from Switzerland.

Notable News & Economic Updates:

  • China’s economy under pressure as factory activity slows in Aug, services contract
  • Oil, gasoline prices rise as Ida kicks hurricane season into a higher gear
  • OPEC raised 2022 global demand forecast
  • Global Manufacturing PMI eases to six-month low as supply chain issues constrain output growth
  • Australia GDP growth slows in Q2 ahead of COVID lockdown downturn
  • U.S. offshore oil output inches back as infrastructure woes slow recovery
  • ECB VP de Guindos: Inflation to pick up this year but fall back in 2022, central bank to raise growth forecast next week
  • Oil drops after OPEC+ reaffirms supply return as demand wavers
  • Soaring COVID-19 infections restrain U.S. job gains in August
  • Chinese Caixin services PMI tumbled from 54.9 to 46.7 vs. 52.0 forecast
  • Eurozone final services PMI downgraded from 59.7 to 59.0
  • Fed Chairman Powell’s odds at renomination come down to politics
  • United States, Mexico to restart economic talks after 4 years on Sept. 9
  • U.S. service sector growth slows in August, supply constraints easing a bit – ISM survey
  • Bitcoin Hits 3.5-Month High Over $50K as Ether Tops $4K

Intermarket Weekly Recap

We saw a steady stream of economic updates this week, but there were no major catalysts to spark an oversized move of note, not even from the monthly U.S. employment update. Overall, global economic data was mixed, but arguably, we’re seeing signs of a potential peak in the global economic recovery. Business sentiment data seems to be pulling back from record positive levels, and lagging data like GDP and employment updates were disappointing as well.

Oddly enough, this didn’t seem to deter risk-on sentiment as we saw risk assets outperform the safe havens for most of the week. This is likely a continuation of speculation that we won’t be seeing central banks taper supportive monetary policy as worries of an approaching global economic slowdown grows.  Weak USD sentiment may have also been a factor as well, sparked by Fed Chair Powell’s tapering comments from his Jackson Hole speech last Friday.

Oil price action was relatively muted despite traders having to navigate oil production developments from the Gulf of Mexico after Hurricane Ida, as well as commentary from OPEC on future supply and demand outlooks.

Crypto, as usual, was the one areas of tradable volatility, albeit at lower levels.  The bulls were likely happy campers this week as we saw broad gains, mainly lead by Ether (up +21% this week) and the altcoins space. The rapid growth of the NFT and Defi markets  were likely drivers, along with the broad risk-on vibes and U.S. dollar weakness environment.

In the forex space, the safe haven currencies were, as expected in risk-on environments, the biggest losers of the week with the Swiss franc taking very last place. We had a rare week where Switzerland posted multiple economic updates, which were all disappointing versus both previous reads and expectations.

The Kiwi took the top spot at the Friday close, despite much weaker-than-expected business confidence and housing data from New Zealand. It’s likely that Kiwi bulls not only rode the broad risk-on sentiment higher, but also longed on news that COVID-19 lockdowns eased in most regions this week.

USD Pairs

  • Hurricane Ida hits U.S. oil hubs in Louisiana
  • U.S. pending home sales drop for second straight month in July
  • Ex-Fed official Lacker warns Powell in ‘tough spot’ on inflation
  • Chicago Business Barometer – Fell to 66.8 in August
  • Soaring home prices shattered another record in June, S&P Case-Shiller says
  • Marked improvement in operating conditions amid strong
  • demand conditions – IHS Markit
  • U.S. private payrolls rise by 374,000 in August – badly missing estimates as virus cases surge higher
  • U.S. labor market powers ahead as weekly jobless claims fall, layoffs hit 24-year low
  • U.S. trade deficit shrinks in July as imports fall
  • Jobs report disappoints — only 235,000 positions added vs. expectations of 720,000
  • U.S. loans Exxon refinery oil from emergency reserve in Ida’s wake
  • Slowest rise in services activity so far this year as demand recovery slows during August – IHS Markit; ISM Services PMI at 61.7 vs. 64.1 in July

GBP Pairs

  • UK households post rare net mortgage repayment in July
  • New BoE chief economist backs limits on quantitative easing
  • UK job creation hits record high, but supply shortages contribute to slowest output growth for six months
  • UK records 207 new COVID-19 deaths, highest since March

EUR Pairs

  • German inflation hits fresh 13-year high in August
  • Confidence in Euro-area economy drops on supply squeeze, virus
  • French inflation stronger than expected in August at 3-year high
  • German unemployment falls further in August as recovery continues
  • ECB should discuss cutting crisis aid next week, Holzmann says
  • Strong 2Q GDP confirmed for Italy
  • Euro area inflation may justify end to ECB crisis mode, says Knot
  • Germany’s retail sales slipped 5.1% vs. projected 0.9% drop in July
  • Italy’s Unemployment Rate Fell to 14-Month Low in July
  • Eurozone manufacturing growth slows to six-month low in August
  • German PMI slips to six-month low in August as supply shortages constrain production
  • German service sector takes another stride towards recovery in August; 60.8 vs. 61.8 in July
  • Volume of retail trade down by 2.3% in the euro area and by 1.9% in the EU

CHF Pairs

  • Swiss leading indicator slips for third month in a row
  • Swiss manufacturing PMI down from 71.1 to 67.7
  • Swiss economy returns to growth in Q2 after COVID-19 restrictions eased

CAD Pairs

  • Canadian economy shrank 1.1% in Q2, July GDP seen down 0.4%
  • Canadian operating conditions improve sharply amid stronger demand conditions
  • The total value of building permits in Canada decreased 3.9% to $9.9 billion in July
  • Statistics Canada says country posted $778M trade surplus in July
  • Labour productivity of Canadian businesses rose 0.6% in the second quarter

NZD Pairs

  • NZ PM Ardern extends Auckland lockdown for another two weeks
  • New Zealand says fall in COVID-19 cases shows Delta lockdown working

AUD Pairs

  • Australia’s company operating profits up 7.1% in Q2
  • ANZ Business Outlook Survey shows an ‘encouragingly robust’ early response to the new lockdown from businesses
  • Australia building approvals decline 8.6% on month in July
  • Australian economy expanded by 0.7% in Q2 vs. 0.5% estimate
  • Australia’s commodity prices up 50.3% y/y in August
  • Australia trade surplus hits record in July as resources boom
  • Covid-19 cases rise in Australian state of Victoria despite lengthy lockdown
  • Australian retail sales fell 2.7% in July vs. projected 1.9% drop
  • Australian PM seeks quicker reopening after COVID-19 vaccine swap with Britain
  • Australia service sector shrinks further in August

JPY Pairs

  • Japan’s July factory output slips as COVID-19 hits car production
  • Japan’s consumer confidence worsens in Aug – govt
  • BOJ official Wakatabe: Central bank ready to ease further if needed
  • BOJ policymaker warns of growing risks to Japan’s economic recovery
  • Japanese PM Suga offers resignation on failure to contain the pandemic
  • Japan Service sector contracts sharply in August

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