Financial markets had a quiet week, as investors anticipated Friday’s high impact forex news. Fed’s sentiments on Friday and economic updates uplifted the comdolls while pushing down the safe-haven currencies.
New Zealand, Australian and Canadian dollars are the top-performing currencies. After suffering massive losses in the previous week, these commodity-linked g7 currencies bounced back sharply in the second half of the week.
Notable Forex News Driving The Market
The Afghanistan Crisis
With the 31st August withdrawal deadline fast approaching, chaos continues to unfold at Kabul airport in the wake of two deadly suicide bombers. The attacks by ISK killed 100 people and wounded more than 100 others on Thursday.
The dead included 13 US soldiers making it harder for evacuations to take place as planned. While close to one hundred thousand have been airlifted from Afghanistan so far, thousands are still waiting with no word yet if the US will extend the withdrawal period or not.
Dovish Remarks From The Fed
On Friday, the American dollar depreciated against its counterparts following Fed chair Jerome Powell’s dovish remarks. At the Jackson Hole symposium, J Powell announced that the American economy rebounded with Fed’s goals.
Among its target goals, the Fed made great strides toward full employment and its price stability. Further, he added that the soaring coronavirus delta variant is still a big concern, and the stimulus package would remain for a while.
Immediately after the high impact forex news, the dollar took a nosedive against other g7 currencies. On the other hand, it was a significant victory for the commodity-linked assets as the dollar succumbed to the pressure.
Coronavirus News – 4th Wave
The resurgence in Coronavirus infections driven by the delta variant weighed heavily on the g7 nations. This pushed the rich countries to introduce booster jabs to protect their citizens fully.
However, the WHO organization asked the rich nations to assist the developing countries, especially Africa, which has vaccinated less than 2% of its population.
So far, only three countries in the world have not started vaccinating their people. They are Rwanda, Eritrea, and North Korea.
Oil Price Predictions
Crude oil prices rallied by 11% to trade over $70 per barrel as production disruptions are expected due to hurricanes in Mexico. Oil price predictions were also supported by the weakening of the USD over the week.
With oil prices on the rise, buyers gravitated towards New Zealand and Canadian dollars.
G7 Economic Review And Performance
Table: g7 performance summary
| Currency pair | 21st August | 27th August | Average price | Percentage change | remarks |
| USD | 92.971 | 92.690 | 92.894 | 0.875 | Drop |
| GBPUSD | 1.3717 | 1.3768 | 1.3734 | 1.0792 | Increase |
| EURUSD | 1.1743 | 1.1795 | 1.1762 | 0.8464 | Increase |
| USDJPY | 109.68 | 109.85 | 109.84 | 0.05 | Increase |
| USDCHF | 0.9122 | 0.9113 | 0.9134 | 0.6324 | Drop |
| USDCAD | 1.2645 | 1.2627 | 1.2626 | 1.5131 | Drop |
| AUDUSD | 0.7208 | 0.7312 | 0.7257 | 2.4951 | Increase |
| NZDUSD | 0.6890 | 0.7010 | 0.6953 | 2.7106 | Increase |
US Dollar Trend This Week
The greenback reversed its previous week’s gains of 1.02% and declined by 0.875%. While the middle-east tensions supported the dollar, it was pressured by economic data and monetary policy.
PMIs for the private sector dominated high impact forex news early in the week. Preliminary figures indicate that August’s Services PMI fell to 55.2 from 59.9.
Mid-week core durable goods data supported the US dollar trend this week, which increased by 0.7% after a previous 0.6% increase.
In Thursday’s trading, the dollar was supported by Q2 GDP. Its economy gained traction by 6.6% in the quarter, better than the earlier projection of 6.5%.
The US corporate profits spiked to a record high in Q2 due to increased demand and better prices. As a result, annualized GDP picked up at 6.6%. However, weekly jobless claims disappointed, spiking to 353K from 349K.
On Friday, inflation and personal spending statistics impacted the dollar performance, though mixed. As projected, the price index surged 3.6%, and personal spending went up by just 0.3%.
While the economic data influenced the dollar, Powell’s speech ultimately led to the dollar’s downfall.
British Pound News
According to British pound news, the sterling climbed by 1.07% to close at 1.3764 after falling by 1.8% the previous week.
Several high impact forex news items drove pound performance, including economic data, Coronavirus news, the Afghanistan crisis, and Fed announcements.
In the early week, Britain’s economic data did not support it. Specifically, the Manufacturing index dropped to 60,4 from 60.1, and the service sector index fell to 55.5 from 59.6.
However, sterling gained some support from an increase in industrial trend orders to 18 from 17. The suicide bombing on Thursday eroded the gains made during the week as sentiments turned risky.
Euro Dollar News
In euro dollar news, the euro increased by 0.83% to 1.1795. Before this period, it had gained 0.84 percent. Early in the week, Germany’s and France’s economies influenced the euro’s performance.
While Germany’s manufacturing index declined to 62.7 from 65.9, the service sector index tumbled to 61.5 from 61.8. For France, the service sector fell to 56.4 from 56.8 while the manufacturing declined to 57.3 from 58.0.
This lowered the Eurozone’s manufacturing index to 61.5 from 62.8 and the services index to 59.7 from 59.8. Germany Q2 Economy improved by1.6%, exceeding the forecast of 1.5 percent. Yearly its economy expanded by 9.8%, reversing a previous 3.4% contraction.
While the GDP figures supported the euro, Germany’s the consumer and business sentiment pressured it. The business index dropped to 99.4 from 100.7, with the consumer sentiments indicator declining to -1.20 from -0.40.
Exchange Rate Dollar To Swiss Franc
By the close of the week, the Swiss franc gained 0.6324% against the American dollar.
Amidst the coronavirus resurgence, risk sentiments and Fed’s dovish remarks on Friday significantly uplifted the exchange rate dollar to Swiss franc.
Coronavirus infections continue to rise in Switzerland, and in response, it ordered 14 million vaccine doses and plans to go on lockdown.
Canadian Dollar Performance
In the last week of August, the Canadian dollar strengthened by 1.5131% to 1.2620, after previously falling by 2.45%. Despite low impact forex news in Canada, the loonie’s performance was triggered by RMPI.
Monthly, the RMPI surged by 2.2%, having increased by 3.9% previously. But it was the robust oil prices, general dollar weakness, and Feds speech that ultimately delivered the loonies performance at the end of the week.
A spike in Canada’s vaccination rate, along with a decline in Delta variant infections, also boosted the Canadian dollar performance.
Asia-Pacific Currencies
In other high impact forex news, While the kiwi and Aussie dollars rallied strongly, the Japanese yen took a heavy beating.
AUD To US Currency Prediction
The Australian dollar gained 2,52% to close at 0.7312, uplifted mainly by Sales data and improved stock prices. Although all odds were against it, the Australian dollar rallied.
In addition to coronavirus, extended lockdowns, poor economic reports, and monetary policy, these were factors that negatively impacted aud to us currency prediction.
Lockdowns are unlikely to end anytime soon due to a very low vaccination rate and a persistent record of new cases. However, amid 30% of its eligible citizens immunized, Prime minister Scott Morrison is pushing for a 70% vaccination rate.
The Reserve Bank of Australia is in danger of a double-dip recession, so it is keeping monetary policy soft. Despite this, the AUD is rallying due to its oversold high-beta status. In other words, the currency tends to rise in value when stocks rise.
NZ To American Dollar Exchange Rate
In a fairly busy week, retail sales and trade data dominated high impact forex news in New Zealand to boost the kiwi dollar by 2.57%. Despite having very low cases of coronavirus, New Zealand went into lockdown.
However, traders are optimistic that they will kick the virus out of the region again. Unexpectedly, the Central Bank of New Zealand left rates unchanged, resulting in a decline in the NZD/USD pair.
The New Zealand dollar rebounded on the back of better retail sales records and a better trade balance report. Nzd bank closed assets buying programs and reported a robust economy. New Zealand’s labor market is back to the epidemic levels.
In the week, Prime Minister Jacinda Ardern indicated that lockdown against the coronavirus in Auckland would most likely extend for two weeks. The announcement weakened the kiwi against the usd.
Usd To Yen Exchange Rate Forecast
The Japanese yen lost 0.05% against the US dollar. Even though Japan posted negative economic data, Friday’s dovish speech significantly impacted the usd to yen exchange rate forecast.
While consumer prices remained relatively unchanged, the manufacturing index fell to 52.4 from 53.0. In addition, coronavirus surges and poor economic updates weighed heavily on the yen.
Conclusion
Fed’s remarks, the Afghanistan crisis, and economic data in the week’s high impact forex news drive the forex market. Despite the risky sentiments, the feds remarks and improved stock prices boosted the commodity-linked assets to be the week’s top performers.