Riskier assets fell to the bottom because of the strong Dollar and negative risk sentiment. Top of the chart was the Dollar, followed by the yen and the Aussie last.
The Fundamentals that Drove Foreign Exchange Events
Federal Reserve Monetary Policy
Prices were relatively calm at the start of the week, most likely as traders sat in the fence awaiting the Federal Reserve’s monetary policy statement on Wednesday.
The Fed surprised traders with a better inflation outlook than expected, as well as hints that interest rate hikes might come sooner. This prompted risk of mood and uplifted the Dollar against other currencies.
Economic Updates
While the US, UK, and Japan had a busier week on the economic calendar, the rest posted less financial data. China’s economy decelerated, pulling down the commodity-related currencies with it.
Coronavirus News
Despite a drop in Coronavirus infection rates globally, the disease still spreads faster than vaccine distribution, putting unvaccinated individuals at risk.
But on the other hand, the death rate from the disease is not declining. Alpha and delta variants are spreading faster, especially in Russia and East Asia.
Oil Prices
Oil rallied for a fourth consecutive week because of strengthening global demand, leading to a 1.1% weekly gain.
International Relation
The US-EU 17 year stalemate ended on Tuesday as they agreed to suspend aircraft-related tariffs at least for five years. A similar but separate agreement also occurred between the US and UK on Thursday.
Ultimately, these agreements show that the US, together with its allies, is taking a unified and coordinated multilateral approach to China.
G7 Fundamental Analysis and Economic Review
Table: G7 performance summary
| Currency pair | 14th June 2021 | 20th June 2021 | Average price | Percentage change | Remarks |
| USD | 90.475 | 92.225 | 91.253 | 2.32 | increase |
| GBPUSD | 1.4112 | 1.3810 | 1.3981 | 2.45 | drop |
| EURUSD | 1.2118 | 1.1863 | 1.2000 | 2.50 | drop |
| USDCHF | 0.8998 | 0.9224 | 0.9092 | 2.7286 | Increase |
| USDJPY | 110.06 | 110.19 | 110.24 | 0.63 | increase |
| USDCAD | 1.2141 | 1.2462 | 1.2284 | 3.15 | increase |
| AUDUSD | 0.7711 | 0.7477 | 0.7607 | 3.36 | drop |
| NZDUSD | 0.7140 | 0.6936 | 0,7048 | 3.85 | drop |
USD Economic News
FOMC policy decisions and projections primarily drove usd performance resulting in an impressive 2.32% gain to 92.225. In the week before, the Dollar had rallied by 0.46%.
The week began with a busy schedule on the economic calendar. On Tuesday, wholesale and retail sales data provided mixed reactions in the usd economic news. While wholesale prices picked up in May, retail sales figures dropped by 1.3%.
Similarly, NY Empire State manufacturing and Industrial production delivered a bag of mixed results. Industrial production increased, but the NY Empire State Manufacturing Index declined from 24.3 to 17.4. But in the last part of the week, Manufacturing PMI index, and jobless claims disappointed.
First, the Manufacturing PMI dropped from 31.5 to 30.7 against a predicted 31.0. Next, against a projected decline in weekly jobless claims to 359K, claims increased from 375K to 412Kas hawkish economic and interest-rate outlooks exceeded expectations.
Although the economic data affected the forex market, the Fed’s monetary policy meeting, economic projections, and press conference ultimately delivered the Dollar’s convincing performance.
The Dollar rose by 0.43% in a single day on Friday in response to more hawkish than expected economic and interest-rate outlooks.
Pound to USD News
Meanwhile, the Pound closed the week down 2.45% to $1.3810. In the week before, it had fallen by 0.35%. The UK had a busier week, with inflation, employment, and retail sales driving the Pound’s foreign exchange current events.
Early in the week, Britain released positive economic data. According to Pound to usd news, the unemployment rate declined from 4.8% to 4.7%, and claimant counts fell by 92.6k.
Midweek the UK’s annual inflation rate spiked to 2.1% from 1.5%, pushing inflation beyond the Bank of England’s aim. But later in the week – ahead of next week’s Bank of England monetary policy decision – retail sales figures disappointed.
In contrast to forecasted increases of 1.6% and 1.5%, retail sales fell by 1.4%, while core retail sales fell by 2.1%. Continual increases in the Coronavirus, specifically the Delta variant, further weakened the Pound.
EUR USD Trading News
Over the week, the Euro plummeted by 2.50% to $1.1863 following a previous week’s drop of 0.48%. In a relatively quiet week in the Eurozone, trade data, Industrial production, and wage growth numbers impacted eur usd trading news.
The Eurozone had a mixed bag of results on the economic update. In the first quarter, industrial production surpassed expectations, the trade surplus narrowed markedly, but wage growth slowed substantially.
Nevertheless, the statistics had minimal impact on the foreign exchange current events, leaving the Euro’s performance up to FED’s market outlook. Towards the end of the week, inflation figures failed to uplift the Euro.
Consumer prices spiked by 0.3% after a previous 0.6% increase, while the annual inflation rate sped up from 1.6% to 2.0%. The producer price index went up 1.5% in Germany, and wholesale prices shot from 5.2% to 7.2%.
Chf Fx News
Swiss National Bank policies worked against the Swiss franc. Chf fx news shows that the bank reaffirmed its decision to maintain a negative interest rate at -0.75%, highlighting a wide gap in the monetary policies between the two nations.
Swiss trade balance surged to a record CHF4.3 billion from CHF 20.8 billion. By the close of the week, the Swiss franc shed 2.7286% to the Dollar.
In addition, the strengthening Dollar pressured the swiss foreign exchange current events.
USD CAD Exchange Rate News
It was a quiet week in the economy diary in Canada, which saw its currency weaken by 3.15% to 1.2465 after a previous 0.61% drop. On Monday, Manufacturing sales figures fell by 2.1%, partially reversing a 3.5% previous increase.
Midweek Canada released positive inflation data, with the annual core inflation rate moving from 2.3% to 2.8%. Also, both consumer prices and core consumer prices surged. Despite the positive data, Fed’s monetary policy led to the downfall of Lonnie.
In other usd cad exchange rate news, Canada recorded 101,600 new jobs.
Meanwhile, in the Asia -Pacific Region,
In the weekly foreign exchange current events, the bears controlled the Japanese yen, Australian Dollar, and New Zealand dollar.
On Thursday, the Aussie and Kiwi currencies rallied following positive jobs data in Australia and a positive GDP report in New Zealand, raising the possibility of a rate hike sooner than expected from the RBA and RBNZ.
But the rebound was short-lived as both currencies plunged.
AUD to USD Forecast News
Aud to usd forecast news shows the Australian Dollar declined by 3.36%. Employment numbers mainly supported the Aussie. Australia posted impressive employment numbers, with figures spiking to 115.2K. so, the unemployment rate shrank from 5.5% to 5.1%.
While the employment figures provided support, the RBA meeting minutes weakened it. The Board reaffirmed its outlook on monetary policy, with interest rates likely to stay on hold until 2024.
In other economic updates, yearly inflation hit 3.6%, with home prices increasing by 1.2% and 1.9%, respectively, for single homes and apartments.
NZD USD Current Events
In the week’s foreign exchange current events, Kiwi Dollar slid by 3.85% to 0.6936, effectively occupying the bottom position. Midweek, RBNZ monetary sentiments sank the kiwi dollar.
A much-needed boost to the New Zealand Dollar came from Q1 GDP numbers. Kiwi’s land economy grew better than expected in Q1 at 1.6% when analysts were expecting modest growth of 0.5%.
Japanese Yen News
The yen could not beat the strong Dollar in a busier week, falling by 0.63% to 110.210. Previously it had dropped by 0.13%. Early in the week, Japan posted positive industrial production figures.
Japanese yen news shows industrial production expanded by 2.9%, better than the previous 1.7% growth. But, mid-week trade data disappointed the yen. Contrary to expectations of a 51.3% yearly increase, exports rose by 49.6%.
As a result, Japan’s trade balance deteriorated from a surplus of ¥253.1bn to a deficit of ¥187.1bn. As the week came to a close, inflationary figures failed to uplift the yen, despite the annual inflation core rate accelerating from -0.1% to 0.1%.
Japan’s economic growth and the imminent Olympic games likely helped the yen to take the second spot.
Conclusion
The Safe-haven foreign exchange current events traded higher, driven by the Fed’s hawkish projections, with commodity-linked currencies coming last. The FEDs’ announcements on Wednesday triggered a massive risk aversion tipping the forex market in favor of safe havens.
Even so, until global public health and economic improvements dictate a Fed rate hike next year, the haven currencies gains may soon reverse with risk appetite.
Related:
Exchange Rate Latest News from 21st to 27th June 2021
Currency Market Analysis Forecast from 7th June to 13th June 2021