The U.S dollar was mixed, rising against the euro, the Swiss Franc and the Australian dollar, steady versus the Japanese Yen and New Zealand dollars and falling against the sterling and the Canadian dollar. Jobless claims rose more than expected and existing home sales rose less but the median price of a home sold rose to a new all-time high. Treasury yields resumed their slide as coronavirus cases in the U.S rise 53% week over week with the Delta variant accounting for 83% of new cases. This variant has already prompted fresh restrictions in other parts of the world and the worry is that come fall, the same will happen in the U.S Canadian retail sales and U.K. PMIs are scheduled for release on Friday as well. Stronger numbers are expected as fewer restrictions bolster economic activity in both countries. The European Central Bank’s monetary policy announcement was the most important event this week but it did not inspire any breakout moves for EUR/USD. This of course is exactly what central bankers hoped for which is limited volatility when big announcements are made. For the ECB, their first major inflation change in two decades was announced earlier this month and today, the central bank made the change in forwarding guidance official. EUR/USD initially traded above 1.1830 but by the London close, it dropped below 1.1760 intraday. We talked about the possibility of EUR/USD rallying after the rate decision in yesterday’s note, but the distance that the ECB has put between themselves, and other central banks prevented a durable bounce. In yesterday’s meeting, the ECB confirmed that they are in no rush to raise interest rates. Not only did they avoid any taper talk, which is a sharp contrast to other central banks, they also amended their forward guidance to account for higher inflation tolerance. From July forward, the ECB expects to keep interest rates at their present or lower levels until inflation reaches 2% well ahead of their projection horizon, AND remain durably at or above that rate for the rest of the projection period. Although ECB President Lagarde said there were expectations for strong growth in the Eurozone economy in the third quarter, the outlook for inflation is subdued and the Delta coronavirus variant is a “growing source of uncertainty.” Between the change in forwarding guidance, Lagarde’s subdued inflation outlook and their concerns about the Delta variant, the ECB has made it very clear that they don’t share the Federal Reserve, Reserve Bank of New Zealand, Bank of Canada and Bank of England’s view that it may be time to start reducing asset purchases. Euro was the day’s worst performer and we expect the currency to remain under pressure.
Euro
The single currency fell as investors digested the European Central Bank statement and comment by its president. ECB President Christine Lagarde, in her media briefing, did not say anything to change the market's cautious outlook on the eurozone. She said a fresh wave of the coronavirus pandemic could pose a risk to the region's recovery. Overall, the EUR/USD traded with a low of 1.1823 and a high of 1.1880 before closing the day around 1.1877 in the New York session.
Yen
The Japanese Yen remained on the back foot after pulling back from multi-month highs amid a recovery in risk appetite as strong earnings lifted Wall Street stocks. The consensus is that the Delta strain does not pose an immediate risk to the recovery, delaying reopening by three months at the most as countries ramp up vaccination drives in response. Overall, the USD/JPY traded with a low of 109.71 and a high of 110.24 before closing the day around 110.10 in the U.S session.
British Pound
The British Pound erased its losses on the week against the dollar yesterday as recovering risk sentiment in global markets helped buoy currencies correlated with economic growth. Investor nerves over whether vaccinations will successfully head off future lockdowns amid surging coronavirus cases had led to a stock selloff earlier this week. Overall, the GBP/USD traded with a low of 1.3754 and a high of 1.3898 before closing the day at 1.3897 in the New York session.
Canadian Dollar
The Canadian Dollar was little changed against the greenback yesterday, with the currency holding on to gains over the last two days as oil rose and ahead of data that could offer clues on the domestic economy's strength coming out of lockdowns. Analysts expect retail sales data on Friday to show a 3% decline in May from April. Overall, USD/CAD traded with a low of 1.2440 and a high of 1.2554 before closing the day at 1.2441 in the New York session.
Australian Dollar
The Australian Dollar kicked off the trading session with downbeat economic data. The country’s services sector saw a contraction in growth for July, while manufacturing growth slowed, according to PMI data from IHS Markit. The services sector index fell to 44.2 from 56, and the manufacturing index fell to 56.8 from 58.6. Overall, AUD/USD traded with a low of 0.7408 and a high of 0.7485 before closing the day at 0.7421 in the New York session.
Euro-Yen
EUR/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is giving a bearish tone and MACD is also issuing a bearish stance. The Relative Strength Index is above 35 and lies below the neutral zone. In general, the pair has gained 0.63%.
Sterling-Yen
Currently, GBP/JPY is trading below 14 and above 50, 100 days moving average. Fast stochastic is issuing a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 41 reading and lies below the neutral zone. On the whole, the pair has gained 1.15%.
Aussie-Yen
Currently, the cross is trading below 14, 50 and 100 days moving average. Fast stochastic is giving a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 36 reading and lies below the neutral region. In general, the pair has gained 1.15%.
Euro-Sterling
This cross is currently trading below 14, 50 and 100 days moving average. Fast stochastic is indicating a bearish tone and MACD is issuing a bullish signal. The Relative Strength Index is above 44 and lies below the neutral region. Overall, the pair has lost 0.54%.
Sterling-Swiss
This cross is trading above 14 and below 50, 100 days moving average. Fast stochastic is issuing a bullish stance and MACD is also indicating a bullish tone. The Relative Strength Index is above 46 and lies below the neutral region. In general, the pair has gained 0.67%.
Disclaimer
This information has been prepared for information only and does not constitute an offer or commitment. This information does not constitute investment advice as defined by the rules of the FCA.
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