The U.S. Dollar took the top spot this week among the major currencies, likely benefitting from the risk aversion environment fueled by the Delta variant’s impact on the economy. It’s also likely traders picked up some Greenbacks after the steady flow of comments from several Fed members that Tapering may be coming soon.
Notable News & Economic Updates:
- Goldman Sachs cuts its US GDP forecast for the 2nd time in a month after last week’s soft jobs report – but lays out 2 reasons why it’s still optimistic
- El Salvador Buys Its First 200 BTC a Day Before Its Bitcoin Law Becomes Effective
- Oil falls on Monday after Saudi price cuts
- Cryptocurrency prices tumble and exchange trading falters as snags crop up
- Chinese trade surplus expanded from $56.6B to $58.3B in August
- RBA sticks with cautious taper plan as Delta sweeps economy
- U.S. trade chief sees ‘difficult logistical challenges’ for WTO summit
- SEC threatens to sue Coinbase over crypto lending programme
- ECB trims emergency support but insists “no tapering”
- Chinese CPI fell from 1.0% to 0.8% instead of holding steady; Chinese producer prices up from 9.0% to 9.5% vs. 9.1% forecast
- Ukraine is the latest country to legalize bitcoin as the cryptocurrency slowly goes global
- SEC sets November deadline for final decision on VanEck Bitcoin ETF
- Fed officials say bond taper could still start this year
- European finance regulator calls crypto ‘volatile’ but innovative
- COVID-19 knocks wind out of UK economy in July
- Robust job gain brings Canada closer to pre-pandemic levels
- Rise of stablecoins, DeFi make central bank currencies ‘urgent’: Bank of International settlements
- Dow drops more than 270 points to end the week, falling for a fifth straight day
Intermarket Weekly Recap
Risk aversion sentiment kicked off early in the week, likely on the continued theme that the recent rise in Delta variant cases may slow down the economic recovery. This was re-enforced last Friday with a highly disappointing U.S. employment report, as well as updated outlooks from analysts lowering their growth outlooks after that event.
We also got economic and monetary policy statements from several major central banks, all basically saying that recent economic data has been highly encouraging but the outlook remains foggy due to the pandemic. Following that sentiment, central bank actions and rhetoric diverged as we saw the Reserve Bank of Australia postpone tapering plans, the Bank of Canada hinted at raising rates, and the European Central Bank tapered the pandemic emergency purchase program only.
And while there was no official statement from the U.S., several Fed members gave speeches this week that highly favored tapering in the U.S. sometime this year. These comments, plus the general risk-off vibes, were likely the drivers for the strength in the U.S. dollar and weakness in U.S. equities and gold.
Crypto markets were, as usual, the biggest movers this week, this time off of a flash crash in bitcoin from around $52K to just below $43K on the same day that El Salvador makes bitcoin legal tender. Was this historical event the catalyst? No one knows, but analysts put the blame on overleveraged traders in the bitcoin derivatives markets.
The action in the forex markets were relatively quiet once again despite a round of monetary policy statements from the major central banks. Again, the Greenback took the top spot with the main focus on the pandemic/future growth concerns, while the Aussie was the the biggest loser by the Friday close. Not only did Aussie bulls suffer from the risk-off environment, but it’s also likely the RBA’s decision to postpone the taper played a key role in AUD’s unrecoverable bearish turn on Tuesday.
USD Pairs
- White House proposes stopgap bill with disaster aid as Congress hashes out trillions in spending
- Businesses are feeling stronger inflation and paying higher wages, Fed’s ‘Beige Book’ says
- NY Fed’s Williams says it may be appropriate to start tapering asset purchases this year
- U.S. Job openings rose to yet another record high in July
- U.S. trade chief sees ‘difficult logistical challenges’ for WTO summit
- U.S. mortgage application volumes at lowest since mid-July -MBA
- Fed’s Kaplan expects to support a taper-plan announcement later this month
- Fed official Bullard: Tapering “will get going this year and will end sometime by the first half of next year”
- Weekly jobless claims post sharp drop to 310,000, another new pandemic low
- Fed’s Bostic expects central bank to pull back on asset buying this year – WSJ
- Fed’s Mester says she would still like to begin taper this year
GBP Pairs
- U.K. Construction activity rises at softest pace since February
- BOE’s Saunders says any rate rise in the next year will be limited
- BoE split evenly in August on whether basic conditions for rate hike met – Bailey
- UK GDP: growth stalls as rising Covid cases and shortages hit recovery
- U.K. total trade deficit, excluding precious metals, widened by £1.5B to £4.9B in the three months to July 2021
EUR Pairs
- German industrial orders surge on robust foreign demand
- German factory orders boosted by foreign demand for ships
- Eurozone construction activity falls further
- German construction sector sees further decline in activity in August as supply issues continue
- August sees fastest decline in French construction output in six months
- German investor morale falls as shortages hold back recovery – ZEW
- German trade surplus expanded from 13.6B EUR to 17.9B EUR
- European Central Bank slows its bond purchases as inflation surges
- French industrial production rose less than expected in July
- In July 2021 the seasonally adjusted Italian industrial production index increased by 0.8% m/m
CHF Pairs
- Swiss Unemployment Rate dips to 2.9% as expected from 3.0%
CAD Pairs
- Canadian consumer confidence slides for third straight week
- Bank of Canada maintains bond buying, sees second-half rebound
- Canadian economic activity expanded for seventh straight month in August: Ivey PMI
- Bank of Canada eyes rate hike before reducing bond holdings
- Canadian economy added 90K jobs in August, marking third month of gains
NZD Pairs
- RBNZ Deputy Governor Bascand to leave bank in January
- Fall in dairy and forestry demand hits commodity prices
- New Zealand buys Pfizer COVID-19 vaccines from Spain
- Dairy prices jump 4% at auction, the biggest gain in six months
- Lockdown causes sharp drop in New Zealand’s electronic card spending
- New Zealand buys Pfizer COVID-19 vaccines from Spain
- Auckland COVID cases drop again as New Zealand presses on with Delta curbs
AUD Pairs
- ANZ-Roy Morgan Australian CC – Weekly Consumer Confidence dips to 100.0 from 101.8 previous
- Australian job ads weaken as lockdowns stretch on
- RBA kept rates on hold at 0.10% as expected
- RBA: Recovery momentum interrupted by Delta outbreak but setback is temporary
JPY Pairs
- BOJ needs realistic price goal to avoid endless stimulus, ex-Deputy Governor says
- Japan upgrades Q2 GDP on stronger business spending
- Japan Eco Watchers current, outlook falls
- Japanese preliminary machine tool orders down from 93.4% to 86.2% y/y
