Last week, the US dollar traded higher with the DXY index closing at 92.71 supported by safe-haven status amid a gloomy market mood.
In addition, the US dollar’s rise was also driven by a sharp rise in New York’s Empire State Manufacturing index, which jumped to 43.0 in July, hitting a record high and far exceeding market expectations.
For the coming week, the United States will publish a preliminary reading of the Markit Manufacturing and Services PMI for July, with the market expecting slower growth in private sector activity.
However, pressure on global markets is likely to benefit the dollar’s safe-haven status to trade higher against high-beta currencies.
Last week, the EUR depreciated against the US dollar, with EUR/USD falling below the 1.1800 level following European Central Bank President Christine Lagarde saying that the July 22 meeting would include new forward guidance and push early withdrawals from the ECB’s bond-buying program.
In addition, the EUR also received pressure from negative economic data, as well as concerns about the spread of the Delta variant growing ahead of the approaching summer holidays.
For the coming week, the main focus of investors is on the ECB’s monetary policy rate decision on Thursday. The ECB is expected to maintain interest rates and resume its bond-buying program in this meeting, after the central bank changed its inflation target to 2% in its recent strategic review.
On the economic front, the preliminary PMI readings for the European Zone are expected to jump higher following the reopening of the economy in the region.
Last week, the GBP traded lower against the US dollar, with GBP/USD slipping to the 1.3770 level, driven by weak employment data.
The unemployment rate in the UK rose to 4.8% in May, compared to the previous month and a market forecast of 4.7%.
For the coming week, the strength in the GBP may be driven by the economic reopening plan scheduled for July 19.
On the economic front, the United Kingdom will publish retail sales figures, as well as preliminary readings of Markit’s Manufacturing and Services PMI for June.
UK retail sales are expected to increase on the back of strong wage growth as well as an increase in BRC spending, while the reopening of the UK economy is projected to boost activity in the country.
Last week, the NZD was one of the strongest currencies. The strength in the NZD has been supported by the RBNZ’s decision to halt buying additional assets under the large-scale asset purchase program (LSAP) from 23 July 2021.
Moreover, the annual inflation rate in New Zealand jumped to 3.3%, the highest level in almost 10 years.
Following the positive data shown in the country, several banks have revised their projections on RBNZ monetary policy -predicting a hike in interest rates could be achieved as early as this August.
For the coming week, we expect the NZD to continue to be supported by hawkish statements from the central bank.
However, a bad market environment could affect the strength of the NZD, as the NZD is one of the high-beta currencies.
Last week, the CAD was among the currencies that depreciated the most due to the sharp decline in crude oil prices.
On Friday, crude oil fell below $ 72 a barrel, the lowest since June 18, due to concerns about oversupply. According to reports, Saudi Arabia and the UAE have reached an agreement on oil policy, which allows the UAE to expand its base production to 3.65 million barrels a day.
In addition, the CAD currency failed to benefit from the results of the Bank of Canada (BOC) meeting. The BOC has maintained its forward indications on its interest rates and reduced asset purchases from $ 3 billion a week to $ 2 billion a week.
For the coming week, investors will be keeping an eye on Canadian retail sales figures for May, which are expected to pick up on strong job growth.
But, a further decline in crude oil prices could limit the rise in the CAD.
Last week, the AUD declined sharply as the increase in COVID-19 Delta variant cases in Asia weighed on market sentiment.
In addition, demand for AUD also declined after Australia imposed restrictions on its 2 largest cities following the increase in COVID-19 infection cases in the area.
For the coming week, we expect the AUD to continue to be under pressure in a negative market environment.
On the economic front, the preliminary reading of Australian retail sales for June is forecast to decline following the lockdowns in that month.
Last week, the JPY was among the strongest currencies besides the USD and NZD. The JPY has been supported by a risk-off market environment, in addition to a decline in US Treasury Yields amid rising inflationary fears.
For the coming week, we expect that the JPY will continue to be supported if the market remains in negative territory.
On the other hand, if the market mood turns positive, we will see some bidding on the JPY.
Last week, CHF traded mixed, benefiting from safe-haven flows but stressed over bid on EUR.
For the coming week, we expect the CHF to continue to be supported against high-beta currencies if the market environment remains risk-off.
However, if the market turns risk-on, we will see a decline in CHF.