FX Weekly Recap: July 24 – 28, 2023

One other main central financial institution shifted its coverage bias and spurred massive strikes this week!

I’m speaking in regards to the ECB and its extra dovish than common announcement. This contrasted with the Fed’s stubbornly hawkish determination, which was in a while underscored by stronger than anticipated U.S. GDP information.

Missed the foremost foreign exchange headlines? Right here’s what you have to 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

Greenback pairs had been off to a rangebound begin, as merchants had been feeling the jitters forward of the July FOMC determination.

The sluggish crawl decrease main as much as the precise occasion urged that market gamers had been relying on a much less hawkish announcement, however Fed head Powell and his fellow policymakers surprisingly saved the door open for extra tightening strikes.

Greenback bulls didn’t appear to purchase it, although, because the U.S. foreign money nonetheless bought off sharply after the FOMC assertion after which once more in the course of the buying and selling periods that adopted.

The tide rapidly turned, nevertheless, when the U.S. superior GDP report was launched. The numbers confirmed that Uncle Sam’s financial exercise had been hella resilient all through Q2, easing home recession fears and boosting Fed charge hike bets. This was additional supported on Friday with the most recent learn on U.S. shopper confidence

🟢 Bullish Headline Arguments

S&P International flash manufacturing PMI improved from 46.3 to 49.0 in July to replicate stronger tempo of trade development vs. 46.1 forecast

CB shopper confidence index jumped from an upgraded 110.1 studying to 117.0 in July, outpacing consensus at 112.1 as Individuals turned extra optimistic in regards to the economic system

FOMC hiked rates of interest by 0.25% from 5.25% to five.50% as anticipated, saved the door open for future charge hikes as Powell mentioned they’ll go on a meeting-by-meeting foundation

Preliminary jobless claims slowed from 228K to 221K within the week ending July 22 vs. 239K forecast

Q2 superior GDP pointed to stronger development of two.4% q/q vs. estimated 1.8% GDP studying and earlier 2.0% determine, which was upgraded from the initially reported 1.1% studying

Sturdy items orders surged by 4.7% m/m vs. 1.3% forecast and 1.8% earlier, core sturdy items orders up by 0.6% vs. projected 0.1% uptick

Pending dwelling gross sales recovered by 0.3% m/m in June vs. earlier 2.5% droop (upgraded from initially reported 2.7% drop) and projected 0.5% dip

College of Michigan Client Sentiment Index for July: 71.6 vs. 64.4 earlier

🔴 Bearish Headline Arguments

S&P International flash providers PMI dipped from 54.4 to 52.4 in July vs. 54.0 consensus to point a slowdown in growth

New dwelling gross sales slowed from a downgraded 715K determine to 697K in June vs. 726K forecast, marking its first decline since February

U.S. Core PCE for June: 0.2% m/m as anticipated vs. 0.3% m/m earlier; private earnings dips to 0.3% (beneath 0.4% m/m forecast; 0.5% 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 foreign money kicked the week off on shaky footing when flash PMI readings from Germany and France stunned largely to the draw back, casting doubts that the ECB can keep its hawkish bias.

A little bit of consolidation ensued in the course of the center of the week, as euro merchants seemed forward to the ECB determination and shrugged off combined enterprise and shopper sentiment indices.

Though the central financial institution nonetheless hiked charges by 0.25% as anticipated, the accompanying assertion turned out to be fairly the bombshell since Chairperson Lagarde talked about the opportunity of pausing charge hikes.

🟢 Bullish Headline Arguments

German GfK shopper local weather index improved from upgraded -25.2 studying to -24.4 vs. -24.8 forecast to replicate slight decline in pessimism

Spanish unemployment charge dipped from 13.3% to 11.6% vs. 13.0% forecast, because the variety of employed rose by 603,900 in Q2

France’s GDP accelerated from 0.1% to 0.5% q/q in Q2 as a rebound in exports offset decrease consumption and slower funding development

Germany exits recession at 0.0% in Q2 (vs. 0.1% anticipated, -0.1% earlier)

Germany Preliminary CPI for July: 6.2% y/y (6.1% y/y forecast; 6.4% y/y earlier)

🔴 Bearish Headline Arguments

French flash manufacturing PMI slipped from 46.0 to 44.5 to sign sharper contraction vs. estimated 46.1 determine, providers PMI dipped from 48.0 to 47.4 vs. 48.5 forecast in July

German flash manufacturing PMI tumbled from 40.6 to 38.8 in July to replicate sooner tempo of contraction vs. 40.9 consensus, providers PMI down from 54.1 to 52.0 to point slower development

Germany Ifo enterprise local weather index for July got here in at 87.3 vs. 87.6 forecast and 88.6 earlier, signaling weaker optimism

ECB raised the deposit charge to three.75% as anticipated however signaled that the mountain climbing regime could also be nearing the tip, with Lagarde suggesting {that a} maintain is on the desk for the subsequent assembly

GBP Pairs

Overlay of GBP vs. Major Currencies Chart by TV

Overlay of GBP vs. Main Currencies Chart by TV

After a little bit of consolidation, the pound bought off sharply on Monday upon seeing downbeat flash manufacturing and providers PMI figures, which urged that coverage tightening is taking its toll on enterprise exercise.

It managed to claw again these losses all through the week (after which some!) however resumed its sideways motion in opposition to its rivals within the absence of top-tier U.Ok. information.

From there, value motion was largely combined, because the U.Ok. foreign money benefited from euro weak spot whereas caving to yen power in direction of the tip of the week.

🟢 Bullish Headline Arguments

CBI industrial order expectations index climbed from -15 in June to -9 in July as an alternative of dipping to the consensus at -17, marking its first enchancment in two years

🔴 Bearish Headline Arguments

S&P International flash manufacturing PMI for July got here in at 45.0 vs. 46.5 earlier, as employment rose for the fourth month in row however at a slower tempo

S&P International flash providers PMI for July slipped from 53.7 to 51.5 vs. 53.1 estimate, reflecting a slower tempo of trade development

CBI realized gross sales index slumped from -9 in June to -25 in July vs. -9 forecast, as orders positioned with suppliers declined for the second month in a row

CHF Pairs

Overlay of CHF vs. Major Currencies Chart by TV

Overlay of CHF vs. Main Currencies Chart by TV

There wasn’t a lot for the Swiss franc to work with by way of financial releases this week, leaving the foreign money to take cues from its counterparts and general market sentiment.

Consolidation got here into play early within the week earlier than a selloff on risk-taking adopted, correlating with the constructive U.S. information dump on Thursday. From there, the franc edged greater in opposition to the higher-yielding currencies and its European rivals however continues to be poised to finish within the purple in opposition to the greenback and yen.

🟢 Bullish Headline Arguments

KOF Swiss Financial Barometer for July: 92.24 vs. 90.73

🔴 Bearish Headline Arguments

Credit score Suisse financial expectations index fell from -30.8 in Might to -32.6 in June to replicate worsening pessimism amongst traders

AUD Pairs

Overlay of AUD vs. Major Currencies Chart by TV

Overlay of AUD vs. Main Currencies Chart by TV

The prospect of extra stimulus from China obtained Aussie bulls charging across the center of the week, as easing efforts aimed largely on the property sector may ramp up demand for commodities.

Nonetheless, the tables turned when Australia printed a downbeat CPI report that dashed hopes for future RBA charge hikes.

Aussie merchants nonetheless scrambled to recoup these losses in a while however struggled to carry their floor when a hawkish Fed assertion introduced risk-off flows again within the combine. AUD even chalked up steep losses to the greenback upon seeing upbeat U.S. GDP information and the yen on rumors of a YCC tweak.

🟢 Bullish Headline Arguments

Flash manufacturing PMI improved from 48.2 to 49.1 in July, marking its five-month excessive

PBOC intervened in FX market to strengthen the yuan, setting USD/CNY at 7.1406 vs. 7.2044 anticipated

China promised extra stimulus, together with charge cuts, tax cuts, debt decision, actual property coverage tweaks and payment reductions, in keeping with state-sponsored media

🔴 Bearish Headline Arguments

Flash providers PMI fell from 50.3 to 48.0 in July, capping off a three-month development interval

Australian headline CPI slowed from 1.4% q/q to 0.8% vs. 1.0% anticipated, annual studying down from 5.6% to five.4% as anticipated

Australian import costs fell by 0.8% q/q as anticipated in Q2, following earlier 4.2% droop because the export value index tumbled 8.5%

CAD Pairs

Overlay of CAD vs. Major Currencies Chart by TV

Overlay of CAD vs. Main Currencies Chart by TV

It was a light-weight week for the Loonie by way of financial information, leaving merchants to take cues from crude oil and general market sentiment.

With that, it was no shock that CAD pairs moved largely sideways early within the week earlier than risk-off flows took maintain on Wednesday.

A pickup in volatility occurred on Thursday, permitting the Canadian foreign money to rake in income on lengthy positions, significantly in opposition to the euro and Aussie, however it was unable to remain within the inexperienced in opposition to the yen and greenback.

🟢 Bullish Headline Arguments

Canadian PM Trudeau introduced a cupboard reshuffle to be able to put extra give attention to financial restoration

Canada GDP for Might: 0.3% m/m (0.4% m/m forecast; 0.1% earlier)

NZD Pairs

Overlay of NZD vs. Major Currencies Chart by TV

Overlay of NZD vs. Main Currencies Chart by TV

The coast was additionally clear for the Kiwi by way of financial releases this week, which left it trailing behind its buddy, the Aussie, and shifting to the tune of market sentiment.

In contrast to its friends that began off with loads of consolidation, the New Zealand greenback was off to a working begin on Monday earlier than regularly cruising greater on China’s stimulus hopes midweek.

It edged decrease in opposition to the greenback main as much as the FOMC determination on Wednesday and likewise the yen on expectations of a YCC tweak for the BOJ assertion in a while.

🟢 Bullish Headline Arguments

Stability of commerce for June got here in at 8.8 million NZD, as exports rose to six.3 billion NZD whereas imports slipped to six.3 billion NZD 

🔴 Bearish Headline Arguments

Bank card spending rose 5.0% y/y in July, slower than 8.7% y/y forecast however stronger than 3.4% y/y earlier

JPY Pairs

Overlay of JPY vs. Major Currencies Chart by TV

Overlay of JPY vs. Main Currencies Chart by TV

The Japanese foreign money was caught in consolidation for majority of the week, as yen merchants had been possible bracing for an enormous announcement in the course of the BOJ assertion in a while.

There have been rumors of potential tweaks within the yield curve management coverage, at the same time as head honcho Ueda burdened that their present coverage is suitable for now.

Thursday noticed a pointy rally for the yen throughout the board, as bears possible lightened up on their brief positions forward of the particular BOJ occasion as hypothesis rose of YCC tweaks, which finally did come to move in the course of the BOJ assertion.

Sadly for yen bulls, Govenor Ueda pushed again on potential charge hike hypothesis saying that the adjustment to yield curve management coverage WAS NOT a step in direction of coverage normalization.

🟢 Bullish Headline Arguments

Tokyo core CPI up by 3.2% y/y in July vs. 2.9% anticipated, 3.1% earlier

BOJ saved its rates of interest regular at -0.10%. It additionally raised the higher limits of its fixed-rate bond-buying from 0.5% to inside 1.0% of the 0% goal, a transfer seen as preparation for an exit from accommodative financial coverage.

🔴 Bearish Headline Arguments

Japanese flash manufacturing PMI fell from 48.4 to 48.1 in July to replicate sharper contraction vs. projected enchancment to 50.1

BOJ core CPI ticked decrease from 3.1% year-over-year to three.0% in June as anticipated, indicating a dip in underlying value pressures

Japanese official famous that BOJ Governor Ueda believes long-term yields stay secure below yield curve management coverage

Japan Providers PPI for June: +1.2% y/y vs. +1.7% y/y in Might; -0.2% m/m vs. 0.0% m/m earlier

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