Overall, we saw the EUR gain good ground against the GBP this week, while the USD trended stronger.

Weekly market assessment for the week ahead

Week starting 17-08-2021

 

USD

  • Over the past week we have seen the USD trend stronger, but with moments of weakness. The weakness came from a lower than anticipated inflation print, where month-on-month inflation was expected to come in at 0.4%, but hit 0.3%, which lowers the probability of rate hikes in the immediate future. 
     
  • Some data points to look out for in the next week are the retail sales data on Tuesday, which is expected to drop  from 0.6% (MoM) to -0.2%. If it surprises on the upside, we should expect USD strength. On Wednesday we look to the monthly FOMC minutes, which will give us an indication of where the US Fed sees the market and economy in the future.

EUR

  • This week we saw significant volatility on the EUR/GBP as the pair ranged between 0.846 and 0.849 for most of the week. Overall, we saw the EUR gain good ground against the GBP this week, ending on 0.850 on Friday. This trend was evident on most other majors (although with less volatility). 
  • Data this week pointed towards slowing growth in the European Economic Area. This is evident in the flat inflation figures reported by Germany on Wednesday and Spain on Thursday. We also saw economic sentiment data coming in lower than expected.
  • There is a growing belief that inflation and high economic growth may have peaked in the Euro area as economies reopen. Covid fears also remain a damper on investor sentiment. These two conditions, together with the continued economic stimulus from the ECB is the main driver of volatility and can be expected to continue in the week ahead. 

GBP

  • Last week, the UK released its trade balance for the month of June. The UK trade deficit expanded, from £0.2 billion to £2.5 billion. Exports fell by 1.5%, while imports saw a 3.2% rise.
  • The unemployment rate came in at 4.7%, for the month of June, decreasing marginally from a reading of 4.8% in May. There were 95,000 new jobs added during the period, compared to 25,000 in the previous month. 
  • Nevertheless, the Pound lost some ground against its US Dollar rival. The GBP/USD pair has depreciated by 0.52% since the opening of trade yesterday. After kicking off the week at 1.3865, the GBP/USD rate is currently sitting at 1.3790.
  • This week, markets will be looking out for upcoming inflation data, along with retail sales and consumer confidence figures. Month-on-month inflation is expected to come in at 0.5% for July, matching the previous month’s reading. Year-on-year inflation is expected to come in at 2.5%.
  • Retail sales are forecasted to expand by 0.8% in the July report, marginally outperforming June’s 0.5% growth.

ZAR

  • This past week saw a weak Rand as strong data around the US jobless claims and flat CPI prints left emerging markets lagging.
  • This coming week will be a tough breaking point when the FOMC meets on Wednesday. The results could tip the emerging markets over the edge if the expected QE tapering isn’t followed.
  • This week will also see South Africa’s inflation rates print, which are expected to increase slightly MoM.

AUD

  • Last week, over in Australia, consumer confidence reports underperformed expectations. NAB business confidence fell to -8 for the month of July, after recording a reading of 11 in June. Westpac consumer confidence slipped by 4.4% in August, after 1.5% growth in July.
  • This week, both manufacturing PMI and services PMI for the month of August will be released. Forecasts of these figures indicate that markets are expecting little change from the previous month’s results.
  • Australian retails sales are due to be released on Friday, after a month-on-month decline of 1.8% in June.

NZD

  • The business performance of manufacturing index for July resulted in an index score of 62.6 which is above the 60 forecast.
  • The Kiwi Dollar did not move much last week, gaining about 0.4% on the US Dollar.
  • The Reserve Bank of New Zealand is expected to make an interest rate decision on Wednesday followed by a press conference. Policymakers expect the Reserve Bank to tighten monetary policy by 25 basis points in order to keep CPI objectives in sight.
  • With the expected cash rate of 0.5%, the NZD is expected to find itself in a tug of war between a possibly tighter monetary policy and optimism resulting from robust output levels.

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