Positive and negative sentiments combined forces to drive forex currency trends this week. The American dollar spiraled downwards while the riskier markets emerged victoriously.
Forex traders also considered the rekindled US-China trade relationship fundamentals in the forex trading.
This week’s wrap provides a review of g7 fx currencies’ overall economic conditions.
Fundamentals That Affected Forex Currency Trends
In the week ending 31st August, forex currency trends were primarily driven by positive sentiments mostly on coronavirus related news.
Negative sentiments and economic data are also featured in the forex market.
Positive Sentiments
Abbott, a US laboratory, received authorization to market a mobile antigen test for COVID 19.
At just $5, the new test delivers results within 15 minutes besides being less naval intrusive swab than the current tests. The lab expects to export up to 50 million tests per month starting from September.
Another COVID 19 vaccine headlines leaning positive emanated in the week. The UK announced plans to fund Cambridge university’s programs to start COVID 19 vaccine trials early next year.
The coronavirus pandemic infections start to reverse the upward trend and slow down by 4%.
The WHO stated that even though the infection rate is still increasing, its pace has slowed globally, generating positive vibes.
The US-China Trade Deal
China and the US finally reaffirm their commitment to the phase 1 trade deal, boosting Tuesday’s financial markets.
A phone call between representatives of the two nations eased the long-standing trade tensions among the two superpowers.
Negative Sentiments
Despite positive vibes on the global decline in covid 19 infections and deaths, increasing numbers and impacts of covid 19 still haunt some parts of the world.
Some areas of Asia and the Mediterranean regions continue to struggle under the weight of increasing infections and deaths.
The US remains the hardest hit, accounting for 62% in fatalities and half of the week’s new cases.
Economic Data
Across the week, Many countries released economic updates, including GDP, monetary policies, and performance index. The updates have a direct impact on the financial market.
China’s economy’s performance specifically affects commodity-related risk markets.
Oil Prices
Changes in oil prices also directly impact world economies and especially commodity-related assets such as the New Zealand dollar, the Australian dollar, and the Canadian dollar.
Oil traded at over $42 per barrel and managed to gain 1.49% in the week.
Weekly Performance Of the G7 Forex Currency Trends
Table: summary of g7 currencies performance
| Currency pair | Week’s opening price | Week’s closing price | Average price | Percentage change | remarks |
| USD | 93.289 | 92.379 | 92.935 | 0.923 | drop |
| GBP/USD | 1.3063 | 1.3345 | 1.3219 | 1.9714 | increase |
| EUR/USD | 1.1787 | 1.1904 | 1.1846 | 0.9241 | increase |
| USD/JPY | 105.97 | 105,44 | 105.94 | 0.32 | drop |
| USD/CHF | 0.9117 | 0.9042 | 0.9073 | 0.8064 | drop |
| USD/CAD | 1.3216 | 1.3099 | 1.3140 | 0.5768 | drop |
| AUD/USD | 0.7161 | 0.7361 | 0/7262 | 2.7859 | increase |
| NZD/USD | 0.6525 | 0.6732 | 0.6633 | 3.144 | increase |
USD Back To The Reds
The greenback started the week badly and stayed under pressure as the bears took control in another week.
Why?
The dollar went down as it reacted negatively to the Fed’s monetary policies. Jerome Powell, the Feds Chair, announced monetary policies to maintain lower inflation rates to boost the labor market and broader economy.
This monetary policy implies that the Fed would not raise rates when unemployment figures drop. Positive global risk sentiments also contributed significantly to the downswing of the US dollar. Forex trader’s prediction chart bias towards risk markets was fueled primarily by positive covid 19 vaccine-related news.
Easing political tensions between the US and China also contributed mainly to the weakening of the greenback. The US and China reaffirmed the phase 1 trade deal steal on course, sparking positive sentiments that pulled the dollar down.
More positive sentiments emerged on forex news that the covid 19 infection rate was on the decline. Besides, Cambridge University secured funding from the UK to finance its trial of coronavirus vaccines.
The US GDP dropped by 31.7%, the worst ever, as its economy entered a recession. On the other hand, consumer confidence dropped significantly to a record six-year low. The consumer confidence index fell from 91.7 to 84.8%, while jobless claims remain high. Forex traders interpreted the fed approach to keep inflation lower, to favor the riskier markets.
The dollar started the week positively on Monday, but four days in consecutive losses saw it close in the reds. The greenback dropped by 0.94% to close at 92.371 to reverse the previous week’s gain of 0.11% in the week.
GDP/USD
The UK had a relatively quiet week economically leaving the sterling pound prediction chart to broad risk sentiments and counter currency flow. The weakening American dollar significantly worked to the advantage of the sterling pound.
Brexit talks still in dreadlock even as the 1 September date to close a deal fast approaches, had no impact on the pound currency trend.
Sterling pound currency trend started the week strongly despite forex news of Boris Johnson planning to step aside in the next six months. Boris cited unending covid 19 health problems and a decline in employment as the main reason to resign.
Positive sentiments sparked by the US-China renewed relationship as the two countries reaffirmed the phase 1 trade deal as being on course. The softening of tensions between the two countries supported the pound.
An additional boost for the pound currency trend came from positive sentiments on covid 19 forex news. Cambridge university secured funds to contact covid 19 vaccine trials. Besides, the global decline in coronavirus infection rates boosted the sterling pound.
However, the pound best currency trend was weakened by the continuing employment decline for three months in a row. In the week ending 31st August, the sterling pound currency trend increased by 2.00% to close at following a paltry gain of 0.03% in the previous week.
EUR/USD
The euro currency trend had a mixed week thanks to global risk sentiments and the greenback’s weakening. The euro currency trend started the week with choppy moves but took an opposing direction from Wednesday.
However, on Thursday and Friday, the bulls took control and safely delivered the euro best currency in the green territories by the end of the week.
The euro currency trend was supported by positive global sentiments on COVID 19 vaccines forex news and the slowed pandemic infection rate. A further boost came from the rapid COVID 19 antigen test kits and the Fed’s monetary policy to lower inflation rates for longer.
Germany, France, and Spain posted reduced GDPs and a poor economic outlook. The impact of the side effects of negative ECB rates that grow over time also pressured the euro downwards. Consumer confidence index also went southwards, pulling the euro down.
The negative economic data were counteracted by economic recovery packages in many states across Europe. Over the week, the euro currency trend improved significantly by 0.90 to close at 1.1903 to recover the previous week’s loss of 0.38%.
USD/JPY
Right from the start of the week, the Japanese yen prediction chart received enormous pressure. Its forex currency trends were driven by poor economic data from Japan and positive risk sentiments throughout the week.
The yen forex currency trends reacted negatively to positive global risk sentiments and the US-China reaffirmation of the phase 1 trade deal.
On Thursday, Japanese yen forex currency trends went down further as traders preferred riskier markets. The riskier market appetite was catalyzed by the Fed’s chair announcement on monetary policies towards inflation.
In the week, Japan recorded an increasing number of new cases of coronavirus daily. According to investing.com, the Japanese yen improved by 0.41% to close at 105.37 following a previous week’s gain of 0.75%.
USD/CHF
The Swiss franc rallied massively against the greenback to close higher at 0.9042 gaining 0.8064%. It gained strength in the weakening greenback and the Fed’s monetary approach to maintaining inflation below 2%.
Towards the end of the week, the KOF financial barometer went up, adding more support to the strengthening swiss franc forex currency strength. More support for the swiss franc also came from positive global sentiments on covid 19 related news.
However, Switzerland’s GDP dropped further by 8.2% in the second quarter of 2020 after having declined by 2.5% in the first quarter. The drop weighed heavily against the swiss franc but managed to recover.
AUD/USD Bullish Forex Trend
Against all the odds, the Australian forex currency trends managed to rally strongly against the dollar. The Aussie gained strength on positive global risk sentiments, improved oil prices, and counter currency flow.
There being no major catalyst from Australia, the aud currency trend kicked off the week positively on the back of positive risk sentiments. Positive sentiments on the US-China reduced tensions upon reaffirming the phase 1 trade deal uplifted the Aussie higher.
On Thursday, the aud currency trend continued to rally on positive sentiments from the US favoring risk markets. However, jobs dropped by 1%, but the consumer confidence index increased to 92.7 from the previous 88.6.
Coronavirus resurgence devastated the Australian economy and destroyed many jobs, pressuring the Australian dollar downwards. New cases of covid 19 and increased deaths were reported in Australia.
On Friday, China blocked meat from Australia, causing jitters among traders. The aud currency trend managed to rally strongly by 2.85%, closing at 0.7365. It rallied strongly over the week but became stronger on Friday.
USD/CAD
It was a tough week for the Canadian dollar despite being supported by higher oil prices at the beginning of the week.
Here is why
First, Canada posted poor economic updates, and the central bank of Canada expressed negative sentiments on its economy. Canadian’s GDP dropped by 11.5 %. Second, traders reacted negatively to the bank of Canada requesting for public opinion on the inflation target.
However, the loonie received some boost from increasing oil prices and the weakening of the US dollar. Positive global risk sentiments played a massive role in uplifting the Canadian dollar.
Early in the week, the loonie was supported by rising oil prices to a positive start. In the end, the loonie forex currency trends increased by 0.59% to close at 1.3099, having risen by 0.67 in the previous week.
NZD/USD This Week’s Top Performer
This week’s stellar performance of the kiwi was fuelled by weakening greenback, positive risk sentiments, and positive coronavirus related forex news.
NewZealand had a full and busy economic calendar for the week. Despite having the best currency trend, retail sales in New Zealand dropped by 13.7%.
Coronavirus lockdown measures negatively weighed on the kiwi dollar but were not sufficient to deter the best currency trend’s bullish run.
Geopolitics and money policy divergence delivered the upswing for the New Zealand dollar to emerge the week’s top performer. Positive US-China trade talks, improved oil prices, and the Fed’s inflation target approach boosted the best currency trend.
In the week ending 31st August, the kiwi forex currency trends rallied massively by 3.09% to close at 0,6743.
Conclusion
This week’s prediction chart indicates that the US dollar had a rough week to close in the reds. NZDUSD currency pair emerged the best while USD/JPY hit rock bottom.
Forex currency trends indicate that the greenback weakened and also lost incredibly against all other g7 currencies.
Positive global sentiments predominantly worked against the greenback and addition to the Fed’s monetary policy.
Unless the Fed makes a deliberate attempt to save the greenback, it will continue on the downswing.
