Weekly Market Update 30 July – FOMC kept rates unchanged, US unemployment and NFP data in view next week

Weekly Market Update 30 July – FOMC kept rates unchanged, US unemployment and NFP data in view next week

1. Dollar saw a relative bearish run this week and depreciated against the major currencies aside from the Kiwi and Aussie. In the recent FOMC meeting, Chairman Jerome Powell held interest rates steady between 0 to 0.25 per cent and committed to keeping the current pace of bond purchases each month. This cooled bond tapering sentiments in the market as Powell said the U.S. economy was still a good deal away from making “substantial further progress” towards stable prices and maximum employment. This might have caused overexcited investors to pull back from the Dollar given the neutral stance. In the coming week, investors will turn their focus to the US unemployment rate and the non-farm payroll (NFP) data which should reflect a steady growth in the labour market.

2. Across the Atlantic, Euro whipsawed before paring recent gains, following the European Central Bank’s (ECB) monetary policy announcement which echoed a strong dovish stance as they steered clear of any taper talks and adopted a higher inflation tolerance level. Looking ahead, Euro could extend its decline against other major currencies as the ECB made it clear that there will be no tapering plans with the Delta virus variant posing uncertainty to the economy. On the data front, the Eurozone will be publishing their preliminary estimates of second-quarter GDP, inflation rates and jobless data along with Germany and Italy business and consumer sentiment.

3. Elsewhere, Pound managed to outperform most of the G7 currencies, aside from the Canadian Dollar. Looking ahead, Bank of England’s Monetary Policy together with its asset purchase facility report would be the highlight for investors as they expect a more bullish recovery from the UK.

4. Despite the commodities currencies underperforming this week, we expect some relief from the Reserve Bank of Australia’s Rate statement in the coming week. Governor Philip Lowe is likely to maintain rates guidance at 0.25% with a hawkish backdrop. Elsewhere, New Zealand’s unemployment rate and Canada’s unemployment rate would be in focus for the coming week.