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HomeForexFX Weekly Recap: August 21 – 25, 2023

FX Weekly Recap: August 21 – 25, 2023

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This week kicked off with an underwhelming PBOC announcement, earlier than the highlight turned to largely downbeat PMI readings and the Jackson Gap Symposium.

A little bit of risk-taking and anti-dollar sentiment lifted the commodity currencies midweek, however the U.S. forex managed to stage fairly the turnaround in a while.

Missed the key foreign exchange headlines? Right here’s what that you must know from final week’s FX motion:

USD Pairs

Overlay of USD vs. Major Currencies Chart by TV

Overlay of USD vs. Main Currencies Chart by TV

Protected-haven flows supported the greenback early within the week, following a smaller than anticipated PBOC prime mortgage fee lower.

Nonetheless, the U.S. forex was barely in a position to lengthen its beneficial properties midweek, despite the fact that 10-year bond yields surged to document highs within the subsequent couple of days.

Largely weak flash PMI readings from main economies boosted the greenback versus the pound, euro, and Aussie on Wednesday, but it surely nonetheless wound up returning its intraday beneficial properties when the U.S. PMI figures additionally fell brief. It didn’t assist {that a} report revealed that U.S. payrolls had been probably 306K decrease than beforehand estimated.

Nonetheless, the Dollar mustered sufficient power to tug up from its intraweek lows on Thursday when merchants began pricing in expectations for a hawkish Powell speech within the Jackson Gap Symposium.

🟢 Bullish Headline Arguments

Federal Reserve Financial institution of Boston President Susan Collins sees additional hikes could also be needed

U.S. 10-year bond yield broke October highs, reaching 4.35% and its highest degree since November 2007

Weekly preliminary unemployment claims for week ending Aug. 18th: 230k (242k forecast; 240k earlier)

Fed Chair Powell reiterates that the Fed will maintain coverage at restrictive ranges till its assured inflation will transfer beneath 2% sustainably; nonetheless open elevating rates of interest if applicable

Cleveland Fed President Mester stated on Friday that the Fed doesn’t need to overtighten, however probably has extra work to do as core inflation is just too excessive.

🔴 Bearish Headline Arguments

Present Dwelling Gross sales for July: 4.07M (4.1M forecast; 4.16M earlier)

S&P downgrades a number of U.S. banks on rising liquidity worries

Richmond Fed Manufacturing Index for August: -7.0 (-6.0 forecast; -9.0 earlier); employment index fell to -3 from 5 in July

Flash Manufacturing PMI for August: 47.0 vs. 49.0 earlier; Flash companies PMI at 51.0 vs. 52.3

U.S. payrolls had been probably 306K decrease than beforehand estimated

Federal Reserve Financial institution of Philadelphia President Harker sees rates of interest at restrictive ranges

U.S. Sturdy Items Orders for July: -5.2% m/m (0.5% m/m forecast; 4.4% m/m earlier ); core sturdy items got here in at 0.5% m/m (0.3% m/m forecast; 0.2% m/m earlier)

EUR Pairs

Overlay of EUR vs. Major Currencies Chart by TV

Overlay of EUR vs. Main Currencies Chart by TV

The shared forex was off to a gradual climb at the beginning of the week, earlier than the rally peaked and reversed by Tuesday.

Merchants in all probability began pricing in expectations for an additional spherical of weak PMI figures, which might probably spotlight the ECB‘s latest shift to a much less hawkish stance. On the similar time, the dearth of euro-related catalysts then probably saved the forex delicate to danger urge for food.

Though there have been some inexperienced shoots within the area’s PMI figures, EUR wound up dropping floor general, besides in opposition to GBP which was additionally coping with dismal outcomes from each manufacturing and companies sectors.

It wasn’t till Thursday’s London session that the shared forex put up a valiant effort to tug greater in opposition to majority of its rivals however nonetheless stayed on weak footing versus the majors (minus Sterling and the Japanese yen) regardless of an arguably more-hawkish-than-expected speech from ECB President Lagarde at Jackson Gap.

🟢 Bullish Headline Arguments

French flash manufacturing PMI rose from upgraded 45.1 studying to 46.4 in August

German flash manufacturing PMI ticked greater from 38.8 to 39.1 vs. 38.9 forecast

European Central Financial institution President Lagarde saved the door open for fee hikes and for prolonged restrictive financial coverage throughout her Jackson Gap speech on Friday.

🔴 Bearish Headline Arguments

German producer costs slumped by 1.1% month-over-month in July vs. estimated 0.1% dip and earlier 0.3% decline

French companies PMI down from 47.1 to 46.7 vs. 47.5 forecast in August

German companies PMI tumbled from 52.3 to 47.3 to mirror main shift to trade contraction

Eurozone shopper confidence index dipped from -15 to -16 vs. expectations of no change in August

ECB Governing Council member Mario Centeno says earlier projected draw back dangers have materialized

GBP Pairs

Overlay of GBP vs. Major Currencies Chart by TV

Overlay of GBP vs. Main Currencies Chart by TV

After a constructive begin to the week and a little bit of consolidation, all hell broke unfastened for the British pound within the days that adopted.

There truly wasn’t a lot on the docket for the U.Ok. economic system, so it seems that the downbeat PMI readings and a few risk-taking midweek are largely in charge for sterling’s losses.

In any case, indicators of persistent bother within the enterprise sectors may be sufficient to persuade BOE officers to take it simple with their fee hikes, despite the fact that inflation stays means above goal.

🔴 Bearish Headline Arguments

U.Ok. Public Sector Internet Borrowing in July: -3.48B (-17.2B forecast; -17.11B earlier)

Flash Manufacturing PMI for August: 42.5 vs. 45.3 earlier, 45.1 forecast, indicating sharper than anticipated tempo of contraction

Flash Providers PMI at 48.7 vs. 51.5 earlier, 50.9 forecast, reflecting shift from trade progress to contraction in August 

U.Ok. Retail Gross sales Volumes in August: -44 vs. -25 earlier

CHF Pairs

Overlay of CHF vs. Major Currencies Chart by TV

Overlay of CHF vs. Main Currencies Chart by TV

The shortage of top-tier catalysts from the Swiss economic system left the franc functioning largely as a counter forex and getting tossed round by modifications in market sentiment and particular person forex drivers.

The lower-yielding forex began off on bullish footing, due to the disappointing PBOC mortgage fee lower, but it surely wound up returning these early beneficial properties the very subsequent day.

One other safe-haven rally boosted CHF midweek when international flash PMIs largely fell in need of estimates, however sentiment shifted a bit after weak U.S. PMIs turned on some risk-on vibes.

The remainder of the week actually was a blended bag as a few of the majors had been centered on their particular person drivers, together with a weak U.Ok. PMIs dropping Sterling, whereas the U.S. tore greater on employment information and hawkish Fed converse.

🔴 Bearish Headline Arguments

Swiss commerce surplus narrowed from 4.82 billion CHF to three.13 billion CHF vs. projected 4.50 billion CHF

AUD Pairs

Overlay of AUD vs. Major Currencies Chart by TV

Overlay of AUD vs. Main Currencies Chart by TV

Regardless of a number of dips all through the week, Aussie pairs cruised usually greater up to now few days.

The commodity forex spent Monday largely in consolidation, chalking up some losses however rapidly getting again on its toes after the PBOC announcement.

A surge in risk-taking and iron ore costs gave the Aussie an enormous enhance on Tuesday, earlier than it returned some winnings on downbeat flash PMI stories.

One other spherical of risk-on strikes saved the higher-yielding forex supported midweek, but it surely ended up returning good chunk of those beneficial properties to its lower-yielding counterparts when merchants started positioning forward of Powell‘s Jackson Gap testimony.

Finally, the Aussie was in a position to maintain on to the highest spot forward of the weekend regardless of a broad risk-off drop throughout the U.S. session, correlating with Fed Chair Powell’s arguably web hawkish speech throughout the Jackson Gap Symposium.

🟢 Bullish Headline Arguments

PBOC lower its 1-year prime mortgage fee from 3.55% to three.45% vs. 3.40% forecast and saved its 5-year fee regular at 4.20% as a substitute of chopping to the 4.05% consensus

🔴 Bearish Headline Arguments

Australia’s flash manufacturing PMI fell from 49.6 to 49.4 in August, companies PMI down from 47.9 to 46.7 to mirror sharper tempo of contraction

CAD Pairs

Overlay of CAD vs. Major Currencies Chart by TV

Overlay of CAD vs. Main Currencies Chart by TV

Other than June retail gross sales information, there wasn’t a lot for the Loonie to chew on all through the week, forcing the commodity forex to take cues from general sentiment.

The beginning of the week was characterised by largely sideways worth motion, besides in opposition to the yen, then risk-off vibes spurred a gradual selloff when international PMIs broadly dissatisfied.

One other spherical of danger aversion kicked in as the main target shifted to the Jackson Gap Symposium, with many market contributors nonetheless betting on comparatively hawkish remarks from Fed head Powell.

🟢 Bullish Headline Arguments

Canada Retail Gross sales for June: +0.1% m/m to C$65.9B (-0.1% forecast; 0.1% m/m earlier)

EIA crude oil inventories down by 6.1 million barrels vs. estimated discount of two.9 million barrels, suggesting stronger demand

🔴 Bearish Headline Arguments

Canada New Housing Value Index for July: -0.1% m/m (0.0% m/m forecast; 0.1% m/m earlier)

NZD Pairs

Overlay of NZD vs. Major Currencies Chart by TV

Overlay of NZD vs. Main Currencies Chart by TV

Weak commerce information printed over the weekend put the Kiwi on shaky floor early within the week, but it surely managed to tug greater and considerably shrug off downbeat quarterly retail gross sales information from New Zealand in a while.

Larger iron ore costs in Dalian lifted the Kiwi’s spirits and allowed it to path behind the Aussie’s rally on Wednesday’s Asian session, earlier than blended worth motion ensued as international PMIs had been launched.

The Kiwi truly managed to attain pips in opposition to the euro, pound, and greenback then, however the higher-yielding forex gave up most of those winnings as we approached the beginning of the Jackson Gap Symposium occasion on Thursday.

Value motion was much less uniform on Friday with the Kiwi missing in main catalysts from New Zealand. It acted as a counter forex to different occasions on Friday, and traded largely steady to lock in web beneficial properties going into the weekend.

🔴 Bearish Headline Arguments

New Zealand commerce deficit widened from 0.11B NZD to 1.11B NZD in July as exports fell 14% whereas imports tumbled 16% throughout the month

PBOC lower its 1-year prime mortgage fee from 3.55% to three.45% vs. 3.40% forecast and saved its 5-year fee regular at 4.20% as a substitute of chopping to the 4.05% consensus

New Zealand bank card spending up by 3.6% year-over-year in July, slower than earlier 5.1% and indicative of weaker shopper spending

New Zealand headline retail gross sales fell 1.0% q/q in Q2 vs. projected 0.4% dip, core retail gross sales slumped 1.8% q/q vs. estimated 0.2% decline

JPY Pairs

Overlay of JPY vs. Major Currencies Chart by TV

Overlay of JPY vs. Main Currencies Chart by TV

Yen bears sprang to motion as quickly because the buying and selling week began, though there have been no clear catalysts for the transfer and recurring yen-tervention fears saved losses restricted.

It’s additionally price noting that, not like many of the main economies, Japan was in a position to print barely stronger than anticipated PMI information. Upbeat BOJ core CPI figures and information of the nation’s Ministry of Finance’s plans to lift long-term charges for debt repayments probably offered some help as properly.

Sideways worth motion ensued within the subsequent couple of days, earlier than a powerful surge in danger aversion boosted the lower-yielding forex when majority of world PMIs got here in beneath estimates.

Nonetheless, the Japanese forex wound up returning most of those beneficial properties on Thursday and Friday, solely securing a win in opposition to the overwhelmed down British pound.

🟢 Bullish Headline Arguments

Japan’s Ministry of Finance to lift its assumed long-term rate of interest (for debt rate of interest funds on annual state finances) to 1.5% based mostly on rising authorities bond yields

BOJ core CPI superior from 3.0% to three.3% year-over-year in July vs. estimated 2.9% determine

Japanese flash manufacturing PMI ticked greater from 49.6 to 49.7 in August to sign barely slower tempo of contraction

Tokyo’s core CPI rose by 2.8% y/y in August (vs. 2.9% anticipated, 3.0% earlier)

Japan’s company companies worth index jumped from 1.4% to 1.7% y/y in July



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