The Forex Week In Review

The Forex Week In Review

A quiet week comes to a close in Forex markets as a lack of tier one data saw most of the majors putting in shallow, range-bound weeks. Earlier in the week a surprise release from OPEC drove a rally in risk-correlated currencies as Qatar, President of the 14-member group, released a statement saying that the market is rebalancing and they forecast higher Oil demand in Q3 and Q4. The statement also outlined plans for an informal OPEC meeting to take place at the end of September.  The statement prompted speculation that talk on freezing Oil output would resume causing a rally in Crude. Despite some weakness mid-week as the latest US Crude Oil inventory data dash earlier forecasts or a drawdown, Oil ended the week strongly as shorts continued to cover on OPEC speculation.

Overview

USD  The US Dollar softened over the week driven by weak productivity numbers which printed -0.5% vs expectations of -0.4% marking the third consecutive quarterly decline, the first series of three straight declines in 37 years. The data suggests likely pressured on GDP and USD remained soft despite Hawkish comments from Fed President Williams saying a rate hike this year is still likely appropriate. On Friday Consumer Confidence data printed below expectations adding further pressure into the close.

EUR The single currency remained buoyant over the week taking its cue from a weaker US Dollar. A raft of EuroZone data on Friday highlighted unstable conditions with German 2Q GDP printing above expectations, at 0.4% vs 0.2$ QoQ and 1.8% vs 1.4% YoY, whilst Italian GDP fell to 0% vs 0.2% QoQ and 0.7% vs 0.8YoY. EuroZone Sentix Investor Confidence for August however came in strongly at 4.2 vs 3 expected.

GBP Manufacturing Production for June came in weaker than expected at -0.3% YoY vs -0.2% expected whilst Industrial Production gained slightly in June, matching expectations. Over the second quarter, total production rose by 2.1%, confirming the out-turn of the GDP report last month, marking the biggest rise since the third quarter of 1999.  Production added 0.3 percentage points to total GDP growth of 0.6% in Q2. The standout data was the UK Visible Trade Balance which widened to $12.5bln in Q2 from £12bln in Q1, which could translate into weaker 2Q GDP. Alongside this, the total trade gap in May was revised significantly higher to £4.2bln from £2.2bln previous due to increased goods imports.  Total Trade Balance for June widened to £5.1bln, more than double the expected £2.25bln marking a 10-month low.

JPY The Japanese Yen strengthened over the week as flows remain inbound in the wake of Brexit. Britain’s decision to leave the European Union may stymie a possible recovery in Japanese demand for steel, according to an official at the country’s top maker of the material.

AUD The rally in risk assets earlier in the week drove AUD higher initially though prices fell back mid-week on weaker China data. Industrial Production data printed below expectations following on from weak Import data earlier in the week.

CAD The Canadian Dollar strengthened over the week deriving support from renewed upside in Oil and and a weaker US Dollar.