The U.S. dollar index, a coefficient used to value the greenback against a basket of six major currencies, closed out the week with strength, although it was unable to extend gains amid risk-on appetite progressively recovering and better than expected earnings reports. Increasing coronavirus cases continue to dampen the economic environment. Equity indexes advanced with confidence, closing at all-time highs while U.S. treasury yields edged higher, reflecting a better market mood. However, we expect a bumpy ride for the upcoming weeks taking into consideration sustained Coronavirus pressures globally which have compromised growth prospects given renewed restriction and the U.S. Federal Reserve looms ahead of Wednesday's Interest Rate decision and monetary policy meeting. Market participants will focus on tapering and will likely hint at some action towards the end of the year. In addition, we expect Durable Goods Orders on Tuesday and Preliminary Gross Domestic Product figures for Q2 on Thursday, while on the inflation front Core Personal Consumption Expenditure will close the week on Friday.
- On Monday (07/26): New Home Sales | New Home Sales Change | Dallas Fed Manufacturing Business Index
- On Tuesday (07/27): Durable Goods Orders ex Transportation | Durable Goods Orders ex Defense | Durable Good Orders | Redbook Index | Housing Price Index | S&P/Case-Shiller Home Price Indices | Richmond Fed Manufacturing Index | Consumer Confidence
- On Wednesday (07/28): Wholesale Inventories | Gross Domestic Product Price Index | Gross Trade Balance | Gross Domestic Product Annualized | Fed Interest Rate Decision | Fed’s Monetary Policy Statement | FOMC Press Conference
The common currency remained subdued against the dollar amid a recovering market mood and uncertainty ahead of the Federal Open Market Committee (FOMC) on Wednesday. The week closed out with European PMIs posting update results while U.S. indicators showed mixed results. The week ahead promises an interesting flow of macroeconomics data, with European morale indicators on Thursday and on Friday, the release of Consumer Price Index, Preliminary Gross Domestic Product, and Unemployment rate figures. However, before the European data by the end of the week, market participants will be tuned to the FOMC and interest rate decision due on Wednesday which will drive market mood as tapering expectations start to clarify.
- On Tuesday (07/27): Private Loans | M3 Money Supply | Services Sentiment | Industrial Confidence | Business Climate | Economic Sentiment Indicator
- On Thursday (07/29): Consumer Confidence - Final Release
- On Friday (07/30): Consumer Price Index - Core | Consumer Price Index | Gross Domestic Product | Unemployment rate
- On Saturday (07/31): Gross Domestic Product
The Pound Sterling showed signals of recovery through the course of last week, with its bullish momentum easing on Friday, closing virtually unchanged. Cable sustains its levels amid mixed UK data indicating economic growth while Brexit and pandemic drivers continue to limit the upside risk for the pair. Meanwhile, U.K. Coronavirus daily cases seem to be easing down with the latest figures reporting 29k new cases, dropping from 50k a couple of weeks ago. The U.K. government continues to bet on the deployment of the vaccine as the best weapon to fight against the virus, issuing notice to Brits to bring forward any vaccination appointments in order to optimize inoculation ratios in the country. Moreover, the Brexit drama seems to have no ending, as now the British government has expressed its interest in renegotiating the Northern Ireland Protocol while the EU has rejected having talks on the matter. The week ahead will be light in terms of data releases in the U.K. and investors' attention will remain around COVID developments and the upcoming FOMC meeting which might shift the risk perception of market participants.
- On Thursday (07/29): Nationwide housing Prices | Net Lending to Individuals | Consumer Credit | M4 Money Supply | Mortgage Approvals
The Japanese Yen dropped 0.4% against the U.S. dollar as it closed the week on Friday amid increasing Coronavirus cases in Japan and the celebration of the Olympic games which started last week. However, the upcoming Federal Open Market Committee (FOMC) monetary policy meeting drags the market attention, inducing a risk-off impulse that has made the Yen advance during the early hours of today’s trading session as U.S. treasury yields edged lower. Concerns about the potential economic fallout from the fast-spreading Delta variant of the virus have dented investor’s appetite to perceive riskier assets, adding to the Yen’s safe-haven appeal. In the absence of major market-moving economic releases, market participants shall remain cautious ahead of the expected FOMC on Wednesday.
- On Tuesday (07/27): Corporate Service Price index
- On Wednesday (07/28): BoJ Summary of Opinions | Coincident Index | Leading Economic Index
- On Friday (07/30): Jobs/Applicants Ratio | Large Retailer Sales | Unemployment Rate | Retail Trade | Industrial Production | Construction Orders | Housing Starts | Consumer Confidence Index | Annualized Housing Starts | Consumer Confidence Index | Annualized Housing Starts
The Loonie sustained pressure against the dollar by the end of last week, failing to extend further gains as investors remain cautious ahead of the Federal Open Market Committee later on this week. Moreover, West Texas Intermediate (WTI) had a significant comeback last week after a risk-off swing made crude oil prices retrace over 7%, and it now trades above USD 72 per barrel providing decent support to the Loonie. On the data front, investors will stay tuned on Wednesday as the Bank of Canada releases their own core estimates on the Consumer Price Index while Statistics Canada will post its headline inflation figures and look to close the week with Gross Domestic Product.
- On Friday (07/30): Raw Material Price Index | Industrial Product Price | Gross Domestic Product
The Mexican Peso edged higher by the close of Friday’s trading session, posting 0.32% gains against the dollar. Investors take caution as the Federal Reserve is due to meet on Wednesday and carry on its monetary policy decision. Amid global uncertainty surrounding the outbreak of the virus and fear of economic slowdown, market participants remain cautious of the outcome from policymakers on the Federal Open Market Committee weighing on riskier assets. Moreover, Mexico’s economic minister, Tatiana Clauthier, met U.S. commerce secretary Gina Raimondo. where the two discussed bilateral issues including the importance of relaunching high-level economic dialogue to deepen bilateral economic relationships which had worsened during previous administrations.
- On Monday (07/26): Jobless Rate
- On Friday (07/30): Fiscal Balance
The Onshore Yuan continues to trade within a 4-week range, currently testing the lower bound of the channel against the dollar. Emerging Asia currencies have been on the backstop as Chinese authorities announced widening their regulatory crackdown on its industries and the global surge of COVID-19 cases which have undermined the appetite for risky assets. However, it is worth noting that China’s issue is with regulation protocols, while macroeconomics and fundamentals remain on track of its expected recovery. For the week ahead, important Non-manufacturing PMI and NBS manufacturing PMIs are expected to be released on Saturday.
- On Saturday (07/31): Non - Manufacturing PMI | NBS Manufacturing PMI
The Brazilian Real remained unchanged on Friday as investors remain cautious ahead of the FOMC and growing Delta variant jitters which continue to dampen the global risk-on mood. However, a third Delta-driven wave could abruptly affect the Brazilian economy as 58.7% of the adult population has received a fits jab while only 21.7% of the population were fully vaccinated. The country did not adopt strict nationwide lockdown measures during the two first waves and it is likely it won’t be the case with this third wave. However, a negative effect in economic pick up could prevent the Brazilian Central Bank from hiking further rates, and possible emergency cash handouts could be extended in such scenarios.
- On Thursday (07/29): Inflation Index | Interest Rate Decision
- On Friday (07/30): Unemployment Rate | Primary Budget Surplus | Nominal Budget Surplus