The Australian dollar effortlessly took the top spot on RBA monetary speculation, and the kiwi dollar settled in the red zone. Overall, the US labor market updates significantly drove the forex market. Other fundamentals include coronavirus news, crude oil prices, international tax law, and economic updates.
The Fundamentals Driving The Forex Market
Coronavirus News
While the coronavirus pandemic is still here with us, positive developments contributed significantly to the positive sentiments in the week. Recent cases in America continue to decline amid the country inoculating over half of its adult citizens.
Meanwhile, Eurozone improves its vaccine distribution and sped up its vaccination campaign. And after months of deliberations president, Joe Biden announced America would distribute 25 million COVID-19 doses to the rest of the world.
As international communities continue to assist India in fighting the pandemic, fresh cases are also skyrocketing in Cambodia, Thailand, and Indonesia.
Economic Updates
The G7 economies released positive economic data which supported their respective currencies. Also, global economic growth reached a 15-year high as the US and UK’s robust data compensated for Asia’s slow growth.
However, a labor market report from the US at the end of the week drove the international currency trends.
Crude Oil Market ends the week Stronger
Amid the continuing coronavirus pandemic and OPEC conditions, the crude oil market recorded a price increase of almost 5%.
International Tax Law
Ministers from the g7 countries committed to at least 15% corporate tax and hoped to complete it in the July G20 ministers’ meeting.
Fundamental Analysis and Economic Review of the G7 Currencies
Table: g7 performance summary
| Currency pair | 31st May | 6th June | Average | Percentage change | Remarks |
| USD | 89.993 | 90.133 | 90.069 | 0.156 | increase |
| GBP USD | 1.4209 | 1.4165 | 1.4157 | 0.1586 | decrease |
| EUR USD | 1.2225 | 1.2167 | 1.2183 | 0.1846 | decrease |
| USD CHF | 0.8992 | 0.8993 | 0.8993 | 0.0445 | increase |
| USD JPY | 109.54 | 109.61 | 109.65 | 0.18 | increase |
| USD CAD | 1.2062 | 1.2076 | 1.2070 | 0.0663 | increase |
| AUD USD | 0.7734 | 0.7741 | 0.7729 | 0.3630 | increase |
| NZD USD | 0.7268 | 0.7209 | 0.7220 | 0.4968 | decrease |
USD
Despite starting the week on a solid foot, the dollar grew dismally by 0.12%. Damaging nonfarm payroll report at the end of the week eroded the substantial gains netted earlier.
The US market remained closed on Monday in recognition of Memorial Monday, and on Tuesday to Thursday, the dollar progressed strongly. As the economy continues to reopen, improved consumer demand fueled manufacturing activity.
As a result, the manufacturing ISM index rose from 60.7 to 61.2. However, the backlog went up due to labor and raw material shortages. For the initial time since the emergence of the disease, weekly unemployment claims fell below 400K. The claims decreased by 20K from 405K in the previous week to 385K.
The dollar, however, suffered a setback in Friday’s international currency trends. Even though the US labor market expected 675K jobs, it recorded 597K new jobs, lowering the unemployment rate from 6.1% to 5.8%.
Also in action in the week was the 10-year US treasury yield, which fell -3.75 basis points. Material and skilled labor shortages disrupted the supply chain, albeit an increased market demand, worsening the economic recovery process.
US business activity expansion rate jumps to 59.4, a record new high since 2006. Production dropped to 58.5 from 62.5, while the service sector index jumped to 70.4. On the other hand, CPI increased by 0.6%.
As exports increased by 1.2% and imports dropped by 2.2%, the US trade balance narrowed to $69 billion.
GBP Vs USD Forecast
In the week, the sterling pound weakened by 0.22% to 1.4157 against the US dollar. The UK manufacturing surged to an unprecedented level, with the manufacturing index soaring to 65.6 from 60.9.
As the country emerged from the pandemic, new orders increased, and production output strengthened, pushing the index higher. UK house prices also affected gbp vs usd forecast.
According to international currency trends, the purchase price rose by 10.9%, the highest monthly increase since 2014. Because of the UK’s stamp duty holiday and the space race, house prices rose significantly.
Additionally, the UK construction sector expanded at its fastest rate in 7 years, with the PMI index jumping from 61.6 to 64.2. Improved public health led to the expansion of new orders.
As the UK economy continues to reopen and improve, retailers recorded increased inflationary pressure due to supply chain disruptions, Brexit Rules, and increased CPI. The UK service sector increased in May from 60.0 to 62.9, the highest level in over two decades.
While the economic updates supported the pound, worries over the new coronavirus variant identified in the UK pressured the pound. AS UK’s prime minister Boris Johnson considers whether to unlock the economy later this month, the new variant pushes infections higher.
EUR USD Forecast
The euro could not withstand the stronger dollar and closed the week down by 0.21% to 1.2167 against the USD. In May, supply chain disruptions weighed on Germany’s PMI dropping from 66.2 to 64.4. Additionally, new orders fell as input cost inflation reached a record high.
German experienced an increased work backlog as new orders outpaced production output, weighing on eur usd forecast. In addition, supply chain disruptions caused production delays because of raw material and skilled labor shortages.
0n positive news, Germany’s infection rate reduced drastically, and plans to ease restriction measures. For the first time, the incidence rate dropped below 100 in two months.
Eurozone inflation surpasses the ECB target of 1.9%, rising to 2%. In addition, industrial producer prices jumped by 1% in the Eurozone and 0.9% in the EU. Eurozone’s Composite output index rose to 57.1 from 53.8, and the services business activity index spiked to 55.2. From 50.5.
The unemployment rate also supported the euro from falling from 8.1% to 8.0%. However, retail sales volumes fell by 3.1% in both Eurozone and the EU.
CHF News Analysis
The Swiss franc gained a dismal 0,0556 against the dollar to close at 0.0.8992. According to Swiss National Bank chair Thomas Jordan, Switzerland will experience mild inflation. He also added the country would continue to be cautiously optimistic about global economic recovery.
Economic data, however, reveals a positive financial future for Switzerland. Q1 GDP dropped by a modest 0.5% against a 0.4% growth forecast. April’s retail trade turnover rose by 34.8% compared to the same period last year, the highest since 2000.
USDCAD News
International currency trends show the Canadian dollar remained virtually unchanged, gaining 0.07% against USD, closing at 1.2084. Canada’s Q1 GDP fell short of expectations mainly because of coronavirus 3rd wave resurgence and weaker consumer spending.
Annually, Canada’s economy expanded by 5.6% against a prediction of 6.8%. However, the disappointing GDP data Canadian economic outlook looks excellent. In Q4 of 2020, Canada’s current account balance improved from a deficit of -$5.3B to a surplus of +$1.2B.
Canada’s Manufactured goods industrial Production Price index (IPPI) grew by1.6%. On the other hand, the Raw Materials Price Index (RMPI) increased by 1.0%. Canada Ivey PMI climbed to 64.7 from 60.6, while building permits fell by 0.5%.
However, Canada suffered another job market setback ahead of reopening plans. The unemployment rate climbs to 8.2% as the labor market lost 68K jobs. Meanwhile, in the Asia-Pacific region, it was a mixed reaction.
AUDUSD
For the past three months, the Aussie dollar performed poorly, but it pulled a big surprise in the last week. Supported by RBA monetary speculation at the end of the week, it emerged as the week’s top performer gaining 0.35% to 0.7739 against the usd.
Building approvals in Australia reduced by 8.6% against a 9.9 projected decline, and as expected, Australia maintained its current interest at 0.10%. The international currency trends show Australia’s economy expanded by 1.8%.
And as expected, retail sales rose by 1.1%, and manufacturing PMI reached a new high level. Also favorable to the Aussie was international trade data. The trade surplus widened to 8.08B AUD from 5.57B AUD.
USD JPY News Forecast
The yen expanded to a high of 110.32 before closing the week at 109.52, gaining 0.30% against usd. Japan’s positive economic data and US labor data largely drove usd jpy news forecast.
Consumer Confidence Index (CCI) dropped from 34,7 to 34.1. However, house sales figures improved from 1.5% to 7.1%. Factory output and retail sales figures improved by 2.5% and 12.0 respectively.
On a sour note, coronavirus infections weighed heavily on capital spending and the service sector to drop by 7.8% and 3%, respectively.
NZ Vs US Dollar
In a relatively quiet week, nz vs us dollar exchange rate lost 0.50%. The assistant governor of the New Zealand central bank said the bank would rather keep the current monetary stimulus in place than remove it soon.
While the ANZ commodity price index increased by 1.3%, building consent increased by 4.8% and business confidence improved from -2 to 1.8.
Conclusion
In the international currency trends, usd was mixed gaining against nzd, eur, gbp but fell against jpy, aud, and CHF but virtually unchanged against the cad.
Contrary to the usual direct correlation to the broad risk sentiments, G7 currencies in the week reacted primarily to the US labor data and specific country’s economic data.
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