The last week of May had a relatively quiet economic diary but a positive leaning one for forex traders. Eventually, financial data and central bank sentiments on monetary policy drove forex market performance. Overall, the latest forex updates for the week were a mixed bag.
New Zealand emerged as the week’s strongest despite a bearish run in the second half of the week. On the other hand, the dollar struggled to close firm, and the yen settled at the bottom.
The Fundamentals In The Forex Updates
Coronavirus News
As the global economies continue to emerge from the coronavirus pandemic, some regions, specifically India and Brazil, still reel from higher infections, hospitalization, and deaths.
The deadly and highly transmissible Indian COVID-19 variant is fast spreading to other countries. For instance, Australia reintroduced 4th lockdown measures in Melbourne province because of the Indian variant.
G7 International Tax Reform
The G7 is working on reforming the international corporate tax system, which could pave the way for a bigger deal among the G20 countries in July. The US is pushing for a minimum tax that would prevent the proposed increased tax rate – from 21 to 28% – negatively affecting a country’s international competitiveness.
However, the UK declined to support the corporate tax championed by president Biden unless Washington strictly addressed international taxation of the US tech giants such as Google, Apple, and Facebook.
Forex USoil
At the start of the week, oil prices increased mainly on Iranian Oil supply hitches before dropping. However, forex usoil prices picked and posted a weekly gain of 4.31%, boosted by US economic updates and optimism on the global economic rebound.
Economic Updates
Economic updates play a critical role in forex trading fundamental analysis. However, the last week of May was relatively quiet on the economic calendar. Nevertheless, some G7 economies posted their data which affected the forex market.
While the overall global economy is increasing, individual performance varies. For example, China’s GDP fell by 0.6% in Q1. China’s economic performance has a significant impact on commodity-related assets.
Central Banks’ sentiments also drove forex market performance. Most maintained interest rates while painting a positive economic outlook.
G7 Currencies Performance
Table: G7 performance summary
| Currency Pair | May 24 | May 30 | Average | Percentage Change | Remarks |
| USD | 89.838 | 89.995 | 89.890 | 0.013 | increase |
| GBPUSD | 1.4155 | 1.4180 | 1.4166 | 0.2297 | increase |
| EURUSD | 1.2215 | 1.2190 | 1.2204 | 0.0862 | drop |
| USDCHF | 0.8969 | 0.9001 | 0.8978 | 0.2785 | increase |
| USDJPY | 108.74 | 109.92 | 109.36 | 0.89 | increase |
| USDCAD | 1.2039 | 1.2078 | 1.2071 | 0.1036 | increase |
| AUDUSD | 0.7752 | 0.7708 | 0.7734 | 0.2975 | drop |
| NZDUSD | 0.7215 | 0.7242 | 0.7250 | 1.0042 | increase |
USD
This week’s latest forex updates showed supply chain disruptions hampered economic growth in the US. As a result, the dollar reversed a previous 0.32% drop to increase by 0.2%.
New homes sale dropped because of low inventories and increased construction costs. Also, because of the increased construction costs and low inventories, home prices surged by 12.6% yearly.
While consumer confidence and durable goods orders substantial drop featured heavily in latest forex news, employment rate and business fixed investment increased. Against a backdrop of reduced projection, consumer spending figures came in slightly lower.
As a result, the consumer confidence overall index lost 0.3 points, settling at 117.2. Due to increased demand, retail prices continue to rise, causing inflation to rise. Likewise, consumer spending increased by 11.3% in Q1, bringing GDP to 6.4%.
Personal income dropped 13.1%, having surged 20.9% previously. Inflation went up by 0.6%, overwhelming the 0.5% surge in nominal personal consumption. The ISM manufacturing index dropped the most since the coronavirus pandemic losing 4 points, settling at 60.4.
The drop in the manufacturing index is due to supply constraints. Supply constraints also affected the ISM service sector, dropping modestly from 62.7 to 62.0. However, the US labor market continues to improve; weekly jobless claims fell by 406K, better than the 425K projection.
The US public health continues to improve, with half of the adult population has received at least the first dose while 40% have received the full dose.
GBPUSD Prediction
Economic data, COVID 10 news, and BoE sentiments largely drove gbpusd prediction. The pound increased by 0.27%. Britain’s public borrowing decreased for the first time last week since the Coronavirus pandemic onset.
The government reduced the borrowing because of the positive economic outlook, which pointed to a quicker improvement in public finances. Confederation of British Industry (CBI) said Tuesday UK’s retail sales decreased to its average sales volume.
CBI reduced from +16 to -3. On Thursday, the sterling pound rose 0.4% against the dollar following BoE’s monetary policy statement. BoE showed it might increase interest rates next year but could be earlier if the economy rebounds faster than expected.
The UK government approved Johnson and Johnson’s single-dose coronavirus vaccine on Friday as part of its vaccination program.
Eur/usd Forecast
German Q1 GDP dropped more than expected as Eurozone bond yields declined because of the coronavirus pandemic. Ifo business climate index improved from 96.6 to 99.2, the highest since mid-2019.
The latest forex updates show German consumer sentiments improved below expectation. However, the slight improvement came as consumers exercised caution despite a positive economic outlook and decline in the coronavirus infection rates.
On the other hand, France’s economy disappointed the eur/usd forecast. France’s Q1 GDP shrank 0.1% against 0.4% growth, while consumer sentiments dropped by 8.3% against a forecasted 4.1% drop. On the other hand, and as expected, CPI rose by 0.3%.
Eurozone CPI inflation jumped to 1.6% from 0.9% but still lower compared to the US figures.
USDCHF News
Swiss National Bank chair Thomas Jordan said there is no point in altering the current monetary policies. He added that the current policies are necessary for controlling inflation and cushioning the citizens against COVID-19 pandemics.
In more usdchf news, the PMI and KOF confidence survey in Switzerland points to an increasing economy as the trade surplus rose to CHF 3.3 billion. Furthermore, according to the latest forex updates, the KOF Economic barometer rose from 136.41 to 143.19.
The Swiss franc lost 0.2785% against the US dollar.
Canadian Dollar Performance
The Canadian economy had a relatively quiet week leaving Lonnie’s performance to oil prices, coronavirus news, and market sentiments. Canada’s vaccination rollout campaign reached a significant milestone, with over half of its population receiving at least one shot.
With the improving public health and drop in infections rate, Canada reopened and eased the lockdown measures in areas under lockdown last week. Bank of Canada Governor T. Macklem said it still needs fiscal support but swiftly added it is appropriate to cut back the extraordinary fiscal packages because of the local economy’s resilience.
The latest forex updates show Canadian Q1 financial data supported the Lonnie. In Q1 Canadian corporations posted 18.1% net income before tax, with 11.0% in the financial sector and 23.1% in the non-financial sector.
The Canadian dollar rose 0.08% against the US dollar last week. Meanwhile, while forex traders massively sold the Japanese yen Australian dollar in the Asia-Pacific region, the New Zealand dollar strengthened.
AUD Currency Prediction
The latest forex updates show Australia posted impressive economic data, but still, its currency fell by 0.26%. First, Australia’s trade surplus jumped to $10,141 million. Then the construction index grew by 2.4%, and the MI leading index shot by 0.2%.
Investors took advantage of tax breaks in Q1 to boost Australian business outlook and performance. Coronavirus resurgence weighed on aud currency prediction. Initially identified in India, the highly infectious coronavirus ravaged Australia, forcing some areas into a fourth lockdown.
New Zealand Vs US Dollar
Last week, the New Zealand dollar was the top performer amid the Reserve Bank of New Zealand (RBNZ) announcing plans to hike interest rates Q3 next year. As a result, the kiwi closed the week stronger by 1.06%.
New Zealand’s latest forex update Q1 shows headline retail sales increased by 2.5% against a 1.8% forecasted to drop. Likewise, core retail sales increased by 3.2%, overshadowing 1.0% projected to decline.
Optimistic Reserve Bank of New Zealand (RBNZ) sentiments primarily drove new Zealand vs us dollar performance on Wednesday. The RBNZ governor maintained interest rates at 0.25% but hinted it could rise in the last quarter of next year.
New Zealand’s strict monetary approach contrasts with Australian and American dovish comments that suggested interest rates would remain unchanged until at least 2024.
USD JPY Forecast
The yen ended the week as the worst performer, dropping 0.82% against the dollar. The strengthening dollar, negative sentiments, coronavirus pandemic, and japan’s economic poor performance drove the yen lower.
The Japanese unemployment rate increased from 2.6% to 2,8% against a projected 2.7% usd jpy forecast, and BoJ CPI dropped by -0.1%. The Japanese government extended the COVID-19 stimulus program by six months to help fight the pandemic.
Conclusion
In response to risk aversion measures, the usd rose against most major currencies except for the new Zealand dollar and sterling pound. Central banks’ monetary policies uplifted the pound and nzd against the usd.
As the global GDP continues to grow and public health improves, analysts expect risk-on sentiments to dominate the latest forex updates in the coming weeks.
Related:
World Currency Market News from 17th to 23rd May 2021
International Currency Trends From 31st May to 6th June 2021