Market predictions and forex forecasts for the week of 5 July 2021.
Week starting 05-07-2021
- Last week US nonfarm payroll data beat expectations for the first time in two months. The number of jobs increased by 850k compared to the 700k expected. Surprisingly, following this increase, we saw the USD weaken drastically. In previous months, when it missed the expected target, the USD also dropped.
- This week starts off slow with many markets closed due to an extension of the US Fourth of July holiday. Furthermore, in the coming week we don’t have much to look out for apart from the Federal Open Market Committee (FOMC) minutes on Wednesday. Here we will gain some indication of the US Fed’s plans going forward, especially with the recent higher inflation as well as the improved employment figures.
- The market remained volatile in the past week. For most of the week we saw the EUR/GBP pair swing within the range of 0.857 – 0.859. This changed on Thursday in anticipation of manufacturing PMI, inflation and US NFP data. The pair then broke the 0.857 psychological barrier and closed at 0.8611 on Thursday. Friday then saw the currency pair swing between 0.856 and 0.857.
- The cause of most of last week’s volatility was the oscillation between the resurgence of Covid fears and continued positive economic data from the EEA. On Tuesday, an increase in the Delta variant was reported. This renewed interest on the EEA Covid restrictions (which are gradually being eased). We also saw economic sentiment increase to a 21-year high and manufacturing increase at the highest pace on record on Wednesday.
- The ECB has continued to reiterate its belief that higher inflation is transitory and has stated that this should start going down during 2023. A stronger USD has also pushed the EUR down slightly as NFP data came out higher than expected on Friday. Going forward, we may see a retraction of risk sentiment, especially as the Delta variant gains pace in Europe and as economies start to pick up (especially in G7 countries) as this may start discussions on tapering in the near future.
- Last week, the Pound made gains against most major currencies, with the exception of the USD and CAD. Risk-off flows seem to have supported the developed market currencies, with the Sterling moving against the Euro, as well as Aussie and Kiwi Dollars. Nevertheless, GBP/USD fell by 0.4% during the week’s trade. After kicking off the week at 1.832 and touching lows of 1.3732, the GBP/USD pair experienced a partial correction and closed the week at 1.3820.
- Economic data from the UK indicates that GDP growth declined by 1.6% in Q1, after previous quarter growth of 1.3%. Furthermore, the country’s current account deficit narrowed from -£26.3B to -£12.8B. Manufacturing PMI fell to 63.9 in June, from 65.6 in May.
- This week, balance of trade for May will be released, after a trade deficit reading of -£0.9 billion in April. Services PMI is due for June, after a reported 62.9 figure for the previous month. Industrial production is also due, after a 1.3% decline in April.
- The Rand ended last week on a high note with the Dollar dropping from its three-month high.
- Being a commodity-linked currency, the ZAR refuses to budge and continues to trade in a narrow band while gold prices fail to fluctuate.
- The country’s economy is struggling and cannot bounce back amidst the ebb and flows of recurring lockdowns and alcohol bans, but the administration of vaccines allows for a glimmer of hope, albeit small.
- The Aussie Dollar was largely in the red last week, as risk-off flows led investors towards more developed markets. After opening the week at 1.830, GBP/AUD rose to 1.849, before closing the week 0.40% higher, around the 1.836 level.
- Australia’s trade surplus rose from 8.157B in April, to 9.681 in May. Furthermore, manufacturing PMI came in at 58.6 in June, down from 60.4 in the previous month.
- Retail sales are due for the month of May this week, after a 0.1% jump in the previous month. Service PMI for June will also be released. Last month’s reading was 58.0. The Reserve Bank of Australia will also be releasing its interest rate, which is expected to remain at 0.1%.
- New Zealand’s new building permits data for May was released on Thursday and dropped for the first time since February. May resulted in 3,939 consents issued which is 2.8% fewer than April’s 4,052 consents.
- We can expect the NZIER Business confidence to be released tomorrow. The index is expected to drop by 7% for the second quarter. We can also expect the NZIER capacity utilisation data for the second quarter to be released.
- On Wednesday, the preliminary ANZ Business Outlook Index for July is expected to drop by 1%.
- With a global resurgence of Covid variants underway, we can expect the global sentiment to test NZD forex pairs.
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