Most of the major currencies have been on the rise this week as the general economic indicators support growth which could push central banks to tighten their very loose policies. The dollar index remains firm above 90 while the Loonie, Sterling and Kiwi are close to closing the week upbeat.
In the equities market, Wallstreet is close to ending the week positively after picking up again on Thursday. Meanwhile, the Canadian stock index reached a fresh all-time, outpacing its US counterparts as commodity prices stay firmly positive. In the UK, the FTSE went downhill on Thursday as a result of a sell-off in the utilities and healthcare sectors. Meanwhile, European stocks have stayed quiet after Tuesday’s over 4 months high.
In the FX space, the greenback is making another attempt to recover after faltering to its lowest in over four months. This week, most of the FOMC members have talked down on inflation again, saying it’s quite transitory. Also, they said the monetary committee might consider tapering in their next meetings following the sharp economic recovery from the bites of Covid-19. On Thursday, the US Initial Jobless Claims fell to a new pandemic low which is good for the job sector and might encourage the Fed’s FOMC team to consider exiting some of its loose policies. Meanwhile, traders and investors will watch out for Friday’s PCE data which is the Fed’s most preferred inflation indicator.
The dollar index (DXY) has surged into the 90 region and stayed above it so far as the market waits for the PCE data coming later today. However, the dollar strength is not yet strong enough as it’s being dominated by the Sterling, Loonie and Kiwi which have been the strongest so far in the second half of the week.
Meanwhile, the Sterling was back on the front foot on Thursday, recovering sharply from Wednesday’s fall after comments from BoE’s Gertjan Vlieghe that the bank might consider raising interest rates sooner than expected in 2022 if the current economic rebound in the UK is stronger than expected. As a result, GBPUSD hit 1.42 again on Thursday with a wild bullish candle despite a strong dollar.
USDCAD shed all of Wednesday’s gains as it almost hit 1.205. CAD resumed the bullish run across the board as a result of solid economic health. The Canadian economy has found support from rising commodities prices especially the oil market together with three consecutive robust monthly employment change data and the retail sales data at 3.6% that far exceeded the market’s expectation of 2.3%.
The NZD has been the biggest FX gainer this week among the majors while its Aussie brother was largely unchanged. NZDUSD tested March high around the 0.73 psychological level on Thursday and was close to a 3-month high. The Kiwi got improved bids after the RBNZ held its official interest rate at 0.25% but projected a raise to 0.5% by September 2022.
Meanwhile, the Euro is trading below 1.22 on Friday, returning from Tuesday’s over four months high of 1.226. The surge was driven by solid figures coming from Germany and last week’s upbeat PMI data in the Eurozone. However, EURUSD is pressured below 1.22 on Friday as the dollar index hit 90.10.
On the downside, the Yen returned to be the biggest loser among the majors, failing to build on last week’s recovery. The currency thus hit its lowest point in seven weeks against the dollar. The weakening Yen came as a result of news that the Japanese government prepares to extend the Covid-19 state of emergency from Friday across Tokyo and eight other cities for three weeks. USDJPY broke above the 109.7-8 resistance region with eyes for 111 if the dollar intensifies the current rally.
Gold fell below 1900 on Friday as a result of a rising treasury yield on the back of its biggest and longest winning streak in 2021. The commodity has gained over 13% since March breaking the 1875 resistance and 1900 psychological level. The retest of 1875 beckons if the current dollar and yield rally persists.
Meanwhile, the oil market is not slowing down by any means. WTI has risen to the pre-pandemic prices and now close to the $68 resistance en-route to the $70 region which, if achieved, will be the first time since October 2018. OPEC has shown again since the turn of the year that it’s more interested in higher and stable oil prices than maximum production as it continues to control supplies despite higher demands from the re-opening of the economies following the Covid shutdowns.
The recovery process from the sell-off in the crypto market has hit another setback on Wednesday and has extended throughout Thursday as the weekend draws close. Bitcoin surrenders below $40,000 again after falling short of breaching above it in the first half of the week. The flagship crypto draws close to $36,000 at 7 PM GMT while Ripple fell below $1. Ethereum failed to hit $3,000 before dropping to $2,500. Doge trades at $0.31 while Litecoin exchanges for $178. Meanwhile, the crypto market cap is currently around $1.59 trillion after gaining over $2 billion in the last three weeks. However, Bitcoin dominance remains unchanged around 43% compared to the last few weeks.
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