October 2, 2021

Weekly Forex Market Recap: Sept. 26 – Oct. 1

 Forex price performance was mixed and choppy this week, indicating that traders put a little bit more weight on individual currency stories, rather than just focusing on broad market themes and risk sentiment.

The Aussie, Loonie, and Greenback  took the top spots this week, while the euro, Sterling and the Kiwi rounded out the bottom spots at the Friday close.

Notable News & Economic Updates:

  • Crude oil hits three-year highs on supply shortages in Europe
  • China power crunch spreads, shutting factories and dimming growth outlook
  • Powell, Lagarde say elevated inflation will prove temporary
  • Evergrande set to miss second offshore bond coupon payment this month, sources say
  • Natural gas drops 7%, sharpest decline since January following big run-up on supply concerns
  • Mexico’s central bank hikes rates to 4.75% on inflation concerns
  • Colombia central bank raises interest rate to 2%
  • China’s manufacturing activity unexpectedly shrinks in September, services offer support
  • Evergrande misses $180 million interest payment
  • Crude oil takes hits as OPEC mulls another production increase
  • Global factories struggling as supply constraints hit, costs rise

Intermarket Weekly Recap

With rising odds that central banks may tighten monetary policy sooner-than-expected to combat rising inflation rates, rising bond yields was the top story earlier this week. The rapidly rising U.S. Treasury 10-year yield was the main focus for market players on Monday and Tuesday, and likely why we saw early week weakness in risk assets like equities and crypto, as well as weakness in gold prices and bond prices. Oil prices were a bit oblivious to this environment as an energy supply crisis emerges, pushing up natural gas and oil prices alongside bond yields.

The momentum in these moves slowed down a bit by the Wednesday session, where we began to see assets and forex pairs kind of moving to their own beat at that point. Equities remained on its downtrend, likely on elevated interest rates,  and debt ceiling fears in the U.S.

Gold and oil picked up some buying pressure, with the latter rallying on strong Chinese demand. And crypto assets found a bid on Thursday after SEC Gensler reiterates support for crypto futures ETF, as well as on comments from Federal Reserve Chair Powell that the U.S. has no plans to ban crypto assets.

By Friday, broad risk sentiment flipped positive, possibly on the news from the pandemic front that there is a now a covid pill from Merck that reduces the risk of hospitalization, death by half for some patients. We also got news that U.S. President Biden signed a stopgap bill to fund gov’t until Dec. 3.

As far as the major currency pairs, again we saw mixed performance and atypical correlations. In what was arguably a negative risk environment most of the week with inflation fears, net negative economic updates, and geopolitical risks (e.g. Evergrande debt crisis, U.S. debt ceiling) in focus, we saw the Aussie and Loonie outperform alongside the U.S. dollar. It’s likely the Aussie found buyers on the idea of Australia reopening its borders in November, and the Loonie on oil’s strength early in the week.

On the other side of the spectrum, weakening eurozone data and the energy crisis is likely what had traders lightening their load on the euro and British pound.  While the risk aversion environment was likely the reason we saw the Kiwi take last place, and possibly on reports of New Zealand seeing its highest number of covid cases yet.

USD Pairs

  • Fed’s Evans sees taper close, expects rate hike in 2023
  • Fed’s Brainard says labor market may soon meet mark for taper
  • Janet Yellen Says U.S. Could Run Out Of Cash To Pay Its Bills In Less Than 3 Weeks
  • U.S. consumer confidence hits seven-month low as near-term economic outlook dims
  • Fed’s Powell says economy is a long way from maximum employment
  • US home price growth reaches new high for fourth consecutive month
  • U.S. consumer confidence hits seven-month low as near-term economic outlook dims
  • U.S. trade deficit climbs again as retails import more consumer goods for holiday shopping season
  • U.S. pending home sales jump to seven-month high; mortgage applications fall
  • Weekly jobless claims increase 11,000 to 362,000; Second-quarter GDP growth raised to 6.7% from 6.6%
  • U.S. President Biden signs stopgap bill to fund gov’t until Dec. 3
  • U.S. PMI drops to five-month low as production hampered by ongoing material and labour shortages
  • ISM Manufacturing PMI at 61.1 in September 2021 vs. 59.9 in August

GBP Pairs

  • Pumps run dry at gas stations in Britain
  • UK energy crisis: what happens now – and should you switch?
  • Bank of England reinforces option for rate hike this year
  • British army to start driving tankers, fuel queues persist
  • UK economy bounced back by more than thought in Q2
  • U.K. Manufacturing upturn slows further as supply-chain strain and labour shortages stymie growth

EUR Pairs

  • Olaf Scholz to succeed Angela Merkel as German Chancellor
  • Eurozone private loans steady at 4.2% vs. projected uptick to 4.3%
  • German, French consumers are surprisingly upbeat
  • German import prices rise at fastest rate in 40 years
  • ECB must be ready to act if inflation entrenched, says Makhlouf
  • German unemployment falls in September despite supply bottlenecks
  • German inflation jumps above 4%, highest in three decades
  • French, Italian inflation rates spike to decade highs on energy
  • Euro area unemployment at 7.5% m/m in August; EU at 6.8% m/m
  • Eurozone Manufacturing growth slowdown continues in September

CHF Pairs

  • KOF Economic Barometer: A further weakening of the recovery
  • Swiss manufacturers “purchasing as much as possible” – PMI data

CAD Pairs

  • Canada Industrial Product Price Index: -0.3% m/m in Aug.; Raw materials price index: -2.4% m/m
  • Canada PMI continues to signal strong growth, but global supply shortages force record rates of inflation
  • Canadian GDP fell 0.1% in July, rise estimated for August

NZD Pairs

  • NZ new home building reaches another record high in August
  • In August 2021, the seasonally adjusted number of new dwellings consented rose 3.8 percent, after rising 2.2 percent in July 2021.
  • ANZ-Roy Morgan New Zealand Consumer Confidence down by 5.1pts to 104.5 in September – lowest for a year

AUD Pairs

  • Lockdowns hammer at Australian retail sales in August
  • PM Morrison: Australia to reopen international borders by November
  • Australian Growth accelerates for the Australian manufacturing sector in September

JPY Pairs

  • Japanese gov’t to lift all COVID-19 states of emergency this week
  • BOJ Gov. Kuroda maintains focus on pandemic despite weak inflation
  • Japan Services PPI: 1.0% in Aug. vs. 1.1% previous
  • BOJ policymakers warned of Japan’s recovery delay, China risk
  • Fumio Kishida wins runoff elections to be next Japanese PM
  • Japan’s factory output extends declines on car production cuts
  • Japan’s Tankan manufacturing index up from 14 to 18; Non-manufacturing index up from 1 to 2
  • au Jibun Bank Japan Manufacturing PMI eased from 52.7 in August to 51.5
  • in September
  • Japanese consumer confidence index rose from 36.7 to 37.8
  • Japanese unemployment rate steady at 2.8% vs. 2.9% forecast

  • BOJ Debated Risks From Supply Constraints, China Slowdown – Sept Summary