The dollar index closed the last week below 91 to complete three consecutive weeks of losses. The S&P 500, on the other hand, recovered swiftly. Earnings reports, FOMC and US GDP reports are expected to steal the spotlight this week.
The dollar opened this week bearish after last week’s low confirmed its lowest in over six weeks. The greenback will hope for a very hawkish Fed and better than expected GDP figures later in the week to get a significant lift. Otherwise, the long-term bearish trend is bound to continue especially as the treasury yield also remains tilted to the downside.
The equities market resurgence was quite encouraging as earnings optimism offset tax hike fears in the second half of the last week. S&P 500 roared back to 4180 and close to taking out the recent high for a fresh record high. The index closed almost at breakeven last week despite an initial 1.45% slump. However, the Asian and European markets started the week struggling.
In the commodity market, Gold collapsed below 1790 after failing to touch the 1800 psychological level as a result of the bond yield performing better last week. Meanwhile, Oil closing prices last week were lower than they opened. WTI continued to prices below $61 and an eventual breakdown might happen this week especially if OPEC finally decides to make a significant addition to its output despite the current Covid record cases in Asia.
In the Forex market, the Euro led the pack as the Dollar faltered thus shooting EURUSD to 1.21. The Sterling ended the week negative but a much disappointing dollar provided support for the Cable at 1.37. AUD was mixed while NZD gained marginally. CAD was the most volatile as the BoC’s hawkish comment rescued the petro-currency after two weeks of losses. Sluggish JPY could be more active this week after BoJ.
Bitcoin and many of the altcoins had the biggest jump since the current decline started mid-April. Bitcoin broke above the falling channel early in the London session on Monday after forming what looks like a bottom at $47,000. The premier crypto hit $53,000 thus bringing many of the major Alts up to speed. Ethereum, Litecoin and Ripple hit $2,500, $244 and $1.2 respectively.
The Week Ahead
Central Banks – BoJ & Fed
Last week, monetary policymakers in Canada and Europe took different directions. A hawkish BoC tightened its QE a bit becoming the first among the G7 economies to do so and looked forward to a rate hike toward the end of 2022. The ECB, on the other hand, stood still.
It’s the BoJ and Fed’s turns this week on Tuesday and Wednesday respectively. BoJ will most likely go with the ECB due to the fresh breakout of Covid in Asia but the bigger spotlight would be on the Fed.
The Fed could lighten the dollar this week with some hawkish tone. The rate is expected to remain at the current level. However, the bank might project an earlier-than-expected rate hike forecast like the BoC last week but the QE taper in this quarter is largely unexpected.
Light macro data on Monday ahead of Tuesday’s BoJ monetary policy meeting. Later on Tuesday, the BoC governor, after last week’s hawkish delivery, will speak before the House of Commons committee. On a loaded Wednesday, Australia CPI data comes first during the Asian session before the very important OPEC+ meeting. The mighty FOMC is expected to poach the spotlight. CAD retail sales will also be of importance to Loonie traders. On Thursday, banks will be shut in Japan but the US advanced quarterly GDP report will further reveal the extent of the US economic recovery. The unemployment claims and monthly pending home sales data coming at the same time might be overwhelmed by the GDP figures. Soft macros to end the week with the CAD monthly GDP, Eurozone prelim quarterly GDP and SNB’s Jordan’s speech to light up a bit.
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