Market predictions and forex forecasts for the week of 6 September 2021.
Week starting 06-09-2021
- Over the past week, we have seen the USD weaken against 18 of the top 20 currencies worldwide. The most significant weakness was seen against the NZD (1.91%) and the ZAR (2.13%). The gains were against the NOK (0.17%) and BRL (0.16%).
- The main data event from the past week was the US employment data, in the form of nonfarm payrolls. It proved an extreme disappointment, as the effects of the Delta variant slowed the number of jobs added to the economy to a trickle of 235,000 from 1.053 million a month before. This does not bode well for the US economy and might delay the end of tapering in the Fed’s bond purchasing program.
- We don’t have much in the form of data releases on the horizon. Most currency movements will stem from global events and further developments on the Covid front in the US.
- This week saw the EUR gain overall, hitting a two-week high of 0.8599 against the GBP. This trend was also visible against most other major currencies including the USD.
- The ECB has started talks on reducing its economic stimulus and scaling back on some monetary policy measures in the coming month (this just fell short of full-on tapering talks).
- Inflation data pointed to a 3% rise for August and (as noted by the ECB) was driven by continued growth, pent up demand and the ongoing supply constraints. However, this was not enough to influence monetary policy (it is expected that inflation will normalise and fall below 2% once supply constraint is relieved).
- This coming week, investors will eye the ECB meeting scheduled on 9 September for any downscaling of economic stimulus (either the PEPP or APP).
- It should also be noted that a downscaling of PEPP might see in increase in the APP thereby continuing the ECB dovish stance.
- The Pound pushed back against the Dollar last week after a rather disappointing nonfarm payrolls report lead to further weakness in the greenback. GBP/USD moved 0.79% higher, closing off at 1.3865 from an open of 1.3758 on Monday.
- Last week was rather light on the data front for the UK. The manufacturing PMI reading for August came in at 60.3, after a 60.4 reading in the previous month. Services PMI reported fell to 55.0 in August after July yielded a PMI of 59.6.
- Construction PMI for August will be released this week. Balance of trade for July will also come due after the UK reported a trade deficit of 2.5 billion in June.
- The ZAR has strengthened this last week against all major currencies. Most noticeable is the 2.26% move against the NOK and 2.11% against the USD.
- The recent improvement in South African risk appetite and talks of tapering bond purchases from the US Federal Reserves has given emerging markets new life.
- This week could see potential poor GDP data in South Africa and consequently a loss of momentum as quarterly GDP growth figures are set to come in lower than expected.
- Last week, Australia’s GDP growth rate figure was reported at 0.7% for the second quarter, down from 1.9% growth in the first quarter. The slower pace of economic recovery can partially be attributed to the ongoing COVID-19 lockdowns across the country.
- Australia’s balance of trade also came due last week. The trade surplus widened from AUD 11.114 billion to AUD 12.117 billion during the month of July.
- Retail sales declined by another 2.7% in July, after the previous month’s release showed a 1.8% month-on-month decline.
- This week, The Reserve Bank of Australia (RBA) will release its interest rate decision. The RBA’s cash rate is expected to remain at the ultra-low level of 0.1%. NAB Business Confidence for August will also come due after a reading of -8 in July.
- In the past week we have seen the NZD gain against 19 of the top 20 currencies, with the most significant gains being against the NOK (2.18%) and the USD (2.02%). The only currency it weakened against was the ZAR (0.36%), which saw an incredible run over the past week in its own right.
- Datawise there is very little to report from New Zealand, with the main events being new building permits which has slowing growth month on month, stagnating to 2.1% from 4%, and the ANZ Business Confidence Index dropping to -14.2 from -3.8 the prior month.
- New Zealand is still under lockdown, but with cases slowing the government has issued a mandate that the whole country, outside of Auckland, will move to level 2 on Tuesday. Currency movements with the NZD would be largely dependent on the country’s response to the Covid outbreak.
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