Safe haven currencies were the top dogs this week as forex traders seemed to have leaned risk-off. Continued coronavirus pandemic uncertainty and negative headlines out of China were the likely main drivers, with inflation and central bank policy speculation not too far behind as possible secondary market drivers.
Notable News & Economic Updates:
- Global stock markets slip Monday on inflation, tax, regulation worries
- Global debt is fast approaching record $300 trillion – IIF
- Gold climbs as U.S. inflation miss clouds Fed taper bets
- U.S. consumer prices slow further in August; inflation likely peaked
- Oil prices end at highest since July as U.S. crude supplies fall a 6th-straight week
- Chinese retail sales slumped from 8.5% to 2.5% y/y vs. 6.9% forecast
- Chinese industrial production down from 6.4% to 5.3% y/y
- U.K. core CPI up from 1.8% to 3.1% vs. 2.9% forecast
- Bitcoin ‘Golden Cross’ appears in price charts, confirming bullish trend
- Solana mainnet back online after day in the dark
- China’s embattled developer Evergrande is on the brink of default. Here’s why it matters
- Oil prices end at highest since July as U.S. crude supplies fall a 6th-straight week
- Fed seen announcing bond taper in November, rate liftoff in 2023
- ECB’s Kazaks sees prospect of faster inflation than forecast
- UK retailers extend losing streak in August
- S&P 500 falls Friday, notches second straight week of losses in September slump
Intermarket Weekly Recap
Dollar, Gold, S&P 500, Oil, Bitcoin Overlay 1-HourDollar, Gold, S&P 500, Oil, Bitcoin Overlay 1-Hour
This week’s risk sentiment vibes looks to be one of risk-off, likely influenced by the never-ending pandemic uncertainty, as well as bearish economic updates & news from China (e.g., Chinese retail sales 2.5% y/y vs. 6.9% forecast; Goldman Sachs, JPMorgan warn of Evergrande’s debt woes spillover risks).
But in terms of overall price action, the different asset classes seemed to have moved to the beat of their own drums. While the the Dollar out performed and equities fell in line with broad risk sentiment, oil bucked the usual tendencies as U.S. oil inventories continue to fall. Gold was also an odd ball this week, starting its downtrend on Tuesday despite the broad risk-off vibes, possibly reacting to Dollar strength and the rise in bond yields.
Crypto traders moved mostly net negative, an understandable bias given that most news flow from the space was net negative. On top of continued regulations fears the have been plaguing the space recently, we also saw fake Litecoin/Walmart partnership news, Solana going dark for almost an entire day, and insider trading at NFT platform OpenSea to push many crypto assets into the red. Alt coins bore the brunt of the bearishness, likely pushing traders to the crypto kings BTC and ETH (up +6.30% and +4.66% respectively) on Friday.
In the foreign exchange space, the U.S. dollar and Japanese yen out performed the rest of the majors, typical results in a risk-off environment. The U.S. dollar also benefitted greatly from the positive U.S. retail sales data update, launching it higher on Thursday, as well as drawing in safe haven hunters on rising contagion concerns from the potential Evergrande debt default situation in China.
The Swiss franc was the biggest loser of the week, an odd result given that a general risk-off lean usually benefits CHF. There doesn’t seem to be a direct catalyst, but the bearish turn on Wednesday and Thursday seems to correlate with a downgraded economic forecast from the Swiss government. It’s also possible that comments from SNB Vice Chairman Fritz Zurbruegg last week that the franc is still highly valued may have continued its influence this week.
USD Pairs
- U.S. August budget deficit falls as revenues recover
- House Democrats propose new tax hikes to pay for their $3.5 trillion bill
- Long-end Treasury yields post biggest drop in a month as traders recalibrate expectations for Fed’s next hiking cycle
- U.S. inflation coming off the boil as prices increase slowly in August
- Tamer US August CPI bolsters Fed’s transitory inflation case
- Empire State Manufacturing Survey: Swift Growth In September
- Jobless claims: Another 332,000 individuals filed new claims last week
- Online purchases boost U.S. retail sales; labor market recovering
- Philly Fed factory index falls in July to lowest since December
GBP Pairs
- UK employee numbers surge above pre-pandemic level
- Britain delays Brexit border checks as food industry warns of permanent shortages
- U.K. headline CPI jumped from 2.0% to 3.0 vs. 2.9% forecast
- UK house prices fall as property market cools
- U.K. retail sales slumped 0.9% in August vs. projected 0.5% rebound
- U.K. consumer inflation expectations up from 2.4% to 2.7%
EUR Pairs
- The number of employed Italians increased by 338K (+1.5%) q/q in Q3
- German Wholesale prices in August 2021: +12.3% on August 2020
- French central bank raises growth outlook as economy booms
- ECB’s Schnabel tries to allay German fears as inflation quickens
- Euro area international trade in goods surplus €20.7 bn; €15.7 bn surplus for EU
- Euro area job vacancy rate at 2.3%; EU rate at 2.2%
- Industrial production up by 1.5% in euro area & by 1.4% in the EU
- Annual inflation up to 3.0% in the euro area; Up to 3.2% in the EU
- Production in construction up by 0.1% in euro area and down by 0.1% in EU
- ECB’s Makhlouf says fears of excessive inflation overstated – for now
CHF Pairs
- SECO Economic forecast: Recovery continues but temporarily loses some momentum
- Swiss tighten rules for unvaccinated travelers to halt case rise
- Switzerland’s producer and import prices increased 4.4% y/y in August 2021
CAD Pairs
- Canada’s Trudeau slammed over rising inflation as election race tightens
- Canada annual CPI rises 4.1% in August, highest level since 2003
- Canadian housing starts trended lower in August
- Trudeau holds slight election edge, with help from his opponents
NZD Pairs
- New Zealand Food prices rise for fifth consecutive month as tomato growers ‘try to survive’
- New Zealand’s economy surges in Q2, supporting rate hike call
- BusinessNZ manufacturing index down from 62.2 to 40.1 in August
- Australia’s house prices post record quarterly rise
- NAB’s August business survey reflects uncertainty, deterioration in Victoria
- RBA Gov. Lowe: Australia won’t see any interest rate hikes for years thanks to the Delta outbreak
- Australia’s Westpac consumer sentiment rebounded 2.0% in Sept
- AU inflation and wage expectations higher in September
- Australian employment slides in August as lockdowns slash workers’ hours
JPY Pairs
- Japanese wholesale inflation on the rise on higher yen-based imports
- Japanese BSI manufacturing index rebounded from -1.4 to +7.0
- Japan’s machinery orders rebound in sign of capex recovery
- BOJ’s Kuroda: Japan inflation to reach 2% goal, but not before 2023
- BOJ’s Kuroda upbeat on Japan Inc despite supply disruptions
- Japan exports slow as supply chain hiccups hit factories
