Market Update 16Jul2021

Weekly Market Update 16 July – Dollar extended its rally, PMI data for US, UK, Eurozone and Australia in focus next week

Weekly Market Update 16 July – Dollar extended its rally, PMI data for US, UK, Eurozone and Australia in focus next week

1. The greenback rallied higher against most of the major currencies as better than expected numbers from jobless claims and retail sales data breathed life back into the Dollar. That said, the Dollar’s upside could be limited following the recent testimony by Federal Reserve Chairman Jerome Powell, which sang a different tune from the one in June. The Fed pledged to continue its bond purchases until there is “substantial further progress” on jobs, with interest rates likely to remain near zero at least until 2023. Meanwhile, risks of higher inflation are downplayed; an indication that there is no rush to shift away from the current accommodative monetary policy. Looking ahead, investors will be keeping a close watch on the Flash Manufacturing and Services PMI data, with forecasts suggesting that we could be seeing a peak in the recovery.

2. Across the Atlantic, Euro and Pound dipped against the safe-haven currencies and outperformed the commodity currencies. Looking ahead, investors will turn their attention to UK’s Retail Sales and Flash Manufacturing and Services PMI data for signs of an economic recovery. Elsewhere, the European Central Bank monetary policy is due on Thursday where they are likely to keep to the current monetary policy stance while allowing inflation to overshoot its 2% inflation target in the near term. On the other hand, Commodity currencies took a hit with job growth in Australia slowing down in June, following stricter measures to curb the rising number of cases. Meanwhile, the Canadian dollar came under pressure as a result of falling oil prices.

3. Overall, the strategies were assisted by the volatility that followed after Federal Reserve Chairman Jerome Powell’s testimony, Bank of England Deputy Governor Dave Ramsden’s hawkish comment which saw the trades benefited from robust price movements. The risk aversion witnessed through the sell-off in commodity currencies benefited the portfolio as well.

Salzworth Asset Management