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Weekly Market Overview

Weekly Market Outlook

US employment report to cap the week

With Fed policymakers split as to whether the Jobs market or inflation should the watched out for, the focus for next week is placed on the release of the US employment report for June next Friday. 

As for other financial releases, we note on Tuesday, UK’s Nationwide House Prices for June, on Wednesday UK’s final GDP rates for Q1 and Thursday Japan’s Tankan indexes for Q2.

On the monetary front, we note Sweden Riksbank’s interest rate decision on Thursday, while various policymakers worldwide are planned to deliver speeches throughout the week. 

On the fundamental side of the pandemic path, the recovery of various economies at a different pace could continue to influence the market’s mood and direction.

USD – US employment report to move the markets

Despite USD’s stabilisation in the past few sessions, it’s about to end the week lower against a number of its counterparts. 
 
The strengthening of the USD, due to the Fed’s hawkish shift, seems to have stopped, at least for now and the market seems puzzled. 
 
It’s characteristic that on the monetary front, Fed policymakers seem split about the bank’s priorities, given that some, like Dallas Fed President Kaplan, tend to highlight the risk of inflationary pressures, while others including NY Fed President Williams note that a high number of jobs has still to be revived.
 
 Thus, high focus is placed on both ends inflation and the employment market, increasing the importance of the release of the US employment report for June on Friday. 
 
As for other financial releases USD traders are not to remain idle as on Tuesday we get the US consumer Confidence for June, on Wednesday we get the ADP National employment figure for June and on Thursday we highlight the weekly initial jobless claims figure as well as the ISM manufacturing PMI reading for the same month.
 
As we mentioned the highlight though of financial releases is expected to be the US employment report for June on Friday with its NFP figure.
 
 As for the greenback’s fundamentals, we note the bipartisan support for the new US infrastructure plan of $579 billion which tended to support the US stockmarkets as it would include investments in the power grid, broadband internet services and passenger and freight rail. 
 
Should the fiscal stimulus be passed into law, especially should it be increased by the reconciliation procedure to $1.2 trillion, it could accelerate the recovery of the US economy and thus provide some support for the USD.
 
We can also see the technical part of the analysis, the price of USDX is in a good rally followed by a weaker pullback, giving hope for the buyers for the 2nd bullish leg towards 93 – 93.50 levels.
 
Long-term perspectives, in my opinion, tend for stable to strong USD. Breakthrough above 93.50 levels going to be a strong alert even to the conservative traders. 
 
Well, yes, as you can see, my bias is more bullish than weak green money. But on the other side of the river, there is a scenario that can prove us wrong and that’s the bearish scenario for the USD. 
 
I will cut it short. The fundamentals may sound bullish nowadays for the USD, but the facts vs talks are still on the downside for the world reserve currency. 
 
FED doesn’t want to go for “tapering”. $120B are still going to be there every month to stimulate the economic recovery. Well, that’s cool, but what about the inflation factor? 
 
The first step is already there – rake hike talks. That’s basically enough to stabilize the greenback for the short-term at least. Which is good sign for buying the dips and keep adding longs with defensive trade management strategy. 

GBP – GDP rates to be watched

UK Pound weakened against the USD, EUR, JPY and CHF yesterday as BoE kept its bond-buying program and its interest rate unchanged, as expected.
 
BoE’s Monetary Policy Committee (MPC) voted 8-1 to keep its government bond-buying program at 875 billion pounds.
 
At the same time, the 20 billion pounds corporate bond purchasing program remains intact, which showed that BoE’s chief economist Andy Haldane remains alone in his call to curb the program. 
 
The bank stated that inflation could surpass 3% as UK’s locked-down economy reopens, yet the acceleration is expected to be temporary by the bank; thus, BoE’s policymakers favoured keeping the stimulus in place unchanged.
 
There seems to be no intention for the bank to tighten its monetary policy for the time being, and that tended to weaken the pound, while we highlight the speech of BoE’s Governor Andrew Bailey on Thursday for any further clues. 
 
On the pound’s fundamentals, we note that the Delta stem of the pandemic is threatening UK’s recovery with a new high of over 16k new cases in a day, not seen since the 7th of February.
 
 As for financial releases in the coming week, we single out three, namely the Nationwide house prices for June on Tuesday, the final GDP rates for Q1 on Wednesday and the final Markit/CIPS manufacturing PMI for June on Thursday.

JPY – With the focus increasingly being on the Olympics

JPY seems to continue to lose ground against the USD for a third consecutive week despite USD’s weakening.
 
 On JPY’s fundamentals, we highlight the importance of the summer Olympics and the difficulties still present in organising them, as posed by the pandemic path in Japan. It’s characteristic that even the Japanese Emperor Naruhito has expressed his worries about the situation.
 
 The media reported that only 16% of the population is vaccinated, and the Japanese government seems to intensify vaccination efforts, especially in the capital Tokyo and Osaka. Yet, it may prove to be a little late, as the Olympic games start on the 23rd of July.
 
On the monetary front, we note the summary of opinions for BoJ’s meeting in June on Monday’s Asian session, which could provide further clues on how dovish the bank’s intentions are. As for financial releases, we note the release on Tuesday of May’s unemployment rate and retail sales growth rate. 
 
On Wednesday, we get the Preliminary industrial output growth rate for May, and on Thursday, we get the Tankan Indexes for Q2.
 

EUR – Preliminary Inflation rates eyed

The common currency seems about to end the week higher against the USD and JPY, and CHF. 
 
Worries about the Delta stem of Covid have started to rise also in the EU and could pose a threat to the area’s economic recovery. 
 
It’s characteristic that German health officials have stated to media that the Delta stem is spreading fast and now comprises more than 15% of cases for Germany.
 
 It is essential to know that daily new cases in Germany tend to remain at relatively low levels, as they do in France. Yet, should they arise, we may see fundamental worries for the Eurozone’s recovery, weakening the common currency. 
 
On the monetary front, we note ECB’s dovishness as expressed by board member Isabel Schnabel, which pushed back the idea of transferring the complete flexibility of its emergency stimulus schemes to other standing instruments. 
 
Also, Ms Schnabel stated that the recovery of the Eurozone’s economy seems to be strong, which provided a more optimistic tone to her speech. 
 
Please note that ECB President Lagarde scheduled to make statements on Thursday and Friday. 
 
As for financial releases, we would note Germany’s, France’s and the Eurozone’s preliminary HICP rates for June on Tuesday and Wednesday, respectively, while on Thursday, we get the final PMI readings of the Manufacturing sector for June on Friday Eurozone’s producer prices for May.

AUD – Chinese PMIs and Trade data for Aussie traders

 
The Aussie seems to have stopped losing ground against the USD and is ended the week in the greens. 
 
On the Aussie’s fundamentals, we note that Australian doctors have reported a rise in the number of people cancelling their vaccine appointments amid a new wave of caution over the AstraZeneca vaccine, as reported by the BBC. The declaration of Sydney as a hotspot for an initial period of 7 days tended to increase worries somewhat. 
 
On the monetary front, we note the planned speech of RBA Governor Lowe on Wednesday. 
 
Good to know that Iron Ore prices are still at high levels despite a slight decline. On the other hand, it seems that China’s push to lower the costs of Iron Ore, one of Australia’s main export products, is not enough to push the price of the mineral lower. 
 
As for financial releases, we highlight Wednesday and Thursday the NBS and Caixin manufacturing PMIs respectively for June, while on Thursday, we also get Australia’s trade data for May.

CAD – High Oil prices support CAD

The Loonie also is about to end the week stronger against the greenback. It’s important to know that the improved market sentiment tended to support the commodity currency as it is considered more “risk-on”. 
 
However, the positive sentiment for CAD was also bolstered by high oil prices as oil is one of the leading export products for Canada. 
 
Also, the drawdown reported for US oil inventories tented to support the notion of a tight US oil market and thus push oil prices higher. 
 
 After the Iranian elections brought to power a hardliner, the chance of Iran flooding the world with its oil seems to be distancing even further. 
 
A deal regarding the Iranian nuclear program is also drifting further away, thus limiting the supply of oil additionally. On the other hand, expectations for the demand for black gold seem to remain high, pushing oil prices higher. 
 
As for financial data of interest for CAD traders, we would note Canada’s GDP rate for April on Wednesday and on Friday Canada’s number of building permits and the trading data both for May and June’s Markit PMI figures.

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