US Inflation Updates and Israel – Gaza conflicts dominated the latest news on forex market this week, triggering risk aversion measures. However, Fed’s sentiments at the end of the week calmed market jitters.
By the end of the week, the British pound topped while the New Zealand dollar and Australian dollar settled at the bottom spot.
The Fundamentals In The Latest News
US Consumer Inflation
The week’s highlight in the latest news on forex market is the US consumer inflation, which leveraged the US dollar against other g7 currencies on Wednesday. A substantial rise in consumer prices also pushed treasury yields higher and generated worries of inflationary pressure increase.
US consumer inflation spiked by 4.2% – the highest in twelve years – on a booming demand despite supply constraints in the reopening economy. This also fueled worries of lengthy inflation in the forex market.
Israel – Gaza Conflicts
Over 65 people have lost lives since violence escalated on Monday. Both sides have suffered in the confrontation that can quickly escalate into a total war. And the UN security council held a virtual meeting on Sunday to deliberate on the conflict.
The barrages have led to mass demonstrations across the Arab nations. In addition, Hamas fired over 2000 rocket salvos at Tel Aviv, with Israel unleashing military action against the Hamas militants.
Coronavirus News
As the global coronavirus contagion rate declines, India still struggles under the pandemic. In India, confirmed cases hit 24 million by the end of the week, with deaths reaching 4K daily.
India’s variant is highly transmissible and is spreading to other countries, creating more concerns in other countries.
Economic Updates
The g7 economies continue to emerge from the coronavirus pandemic restriction measures posting good economic data. However, with China and the US leading on the recovery process, concerns now shift to labour and raw material shortage.
Crude Oil
Crude oil prices were pressured over the week as coronavirus persisted in ravaging India. Also, higher inflation rates weighed heavily on oil, affecting the performance of commodity-linked assets.
G7 Fundamental Analysis and Economic Review
Table: g7 performance summary
| Currency pair | 10th May | 16th May | Average | Percentage change | Remarks |
| USD | 90.185 | 90.318 | 90.410 | 0.113 | increase |
| GBPUSD | 1.4120 | 1.4101 | 1.4093 | 0.9233 | drop |
| EURUSD | 1.2129 | 1.2149 | 1.2119 | 0.1110 | increase |
| USDCHF | 0.9011 | 0.9014 | 0.9037 | 0.0499 | increase |
| USDJPY | 108.78 | 109.42 | 109.21 | 0.76 | increase |
| USDCAD | 1.2097 | 1.2113 | 1.2117 | 0.1360 | increase |
| AUDUSD | 0.7830 | 0.7778 | 0.7779 | 0.7779 | drop |
| NZDUSD | 0.7274 | 0.7243 | 0.7229 | 0.4125 | drop |
USD Performance Analysis
The US dollar grew by 0.11% to 90.318, significantly uplifted by inflationary pressure. Formerly, it had declined by 1.15%. Early in the week, the US suffered a disruptive ransomware attack forcing the Colonial pipeline to cease critical oil network supply to major airports and consumers in some parts of the US.
US job openings soared to 8.1 m from 597K – a record high – on Tuesday. And on Thursday, upbeat weekly jobless claims figures dropped from 507K to 473K, the lowest since the onset of the pandemic.
Improved public health and massive government stimulus packages fueled the economic boom. However, the vigorous growth was hampered by raw materials and workforce shortages, with nonfarm payroll increasing by 266K.
Midweek, more consumer prices drove treasury yields and the dollar with consumer price index (CPI) soaring by 0.8%, the highest since 2009.
However, on Friday, the dollar declined substantially after US retail sales stalled, putting an end to worries about the increasing inflation. The stalled retail sales figures come after a massive 10.7% surge in the previous month.
On Friday, while falling short of prediction, industrial production rose by 0.7%, following a 2.4% previous jump. Consumer sentiment decreased from 88.3 to 82.8, way below the 90.4 projection.
Gbpusd Analysis
Retail sales improved by 39.6% from a previous 20.3% rise to support the pound. On Monday, British PM Boris Johnson unveiled plans to reopen from 17th May as public health improves.
On Monday, home prices spiked by 1.4% – the fastest rate in 5 years – thanks to the extended stamp duty holiday. Mid-week GDP, industrial production, and manufacturing production uplifted the pound.
According to the latest news on forex market, the UK economy shrank by 1.5% in Q1, better than an earlier 1.6% contraction estimate. Previously, the GDP had contracted by 6.1%.
Industrial production grew by 1.8% to beat a projection of 1.0% by economists, while manufacturing production went up by 2.1%.
On Saturday, Scotland’s pro-independence factions won parliamentary seats and vowed to press on with plans for a second secession referendum. However, Boris Johnson promised to oppose the move, terming it “irresponsible and reckless”.
Finally gbpusd analysis, the pound closed the week higher against the dollar by 0.81% to 1.4097 following a 1.17% previous increase.
EUR USD Expectations
According to the latest news on forex market, investor confidence and economic sentiments uplifted the euro’s performance. While investors’ confidence surged from 13.1 to 21.0, Germany’s and Eurozone’s economic sentiments rose from 70.7 to 84.4 and 66.3 to 84.0, respectively.
ECB sentiments also uplifted the eur usd expectations. According to ECB Chief economist Philip Lane, the bank could increase the bond-buying program at its June meeting if necessary. He also added the employment rate is estimated to improve to the pre-pandemic level after 2023.
Germany wholesale selling prices improved by 7.2% thanks to the reduction in COVID–19 infections. On Friday, the latest news on forex market showed the eurozone’s inflation picked up from 1.7% to 2.0%, with industrial production spiking from -1.8% to +10.9%.
In the week, the euro slumped by 0.21% to 1.2141, reversing a previous gain of 1.21%.
Francs To USD
Swiss franc lost 0.0499% to close at 0.9014. With no economic update from Switzerland, the strengthening dollar and risk aversion measures drove its performance. Economic updates from UK and Eurozone affected the francs to usd exchange rate.
USDCAD Pair
Economic data from Canada had a muted impact in the latest news on forex market. Even so, the Lonnie strengthened by 0.24% to 1.2104. Previously the Lonnie had grown by 1.26%.
Bank of Canada’s sentiments negatively affected Canadian dollar performance. The bank’s Governor Tiff Macklem showed he would not rush to increase interest rates despite a favorable economic outlook.
However, the Canadian dollar weakened immediately after his comments to 1.2176. The latest news on forex market shows Canada and the US close ties under jeopardy if the US shuts the Michigan oil pipeline awaiting the court’s ruling.
Wholesale and manufacturing sales edged higher to support Lonnie. Manufacturing sales improved by 3.5% to 57, the highest since 2019, while wholesale figures increased by 2.8%.
Meanwhile, the Asia-Pacific currencies – Australian dollar, New Zealand dollar, and Japanese yen- fell. On Wednesday, the trio lost significantly as a fast rise in US consumer inflation uplifted the greenback and Treasury yields.
AUDUSD Pair
In the week, the Aussie dropped by 0.93% to 0.7771, driven primarily by economic data and forex sentiments. Australian business confidence index improved from 17 to 26, while consumer confidence tumbled from 111.6 to 112.7, delivering the Aussie dollar early in the week.
However, the positive economic updates did not net a weekly win for the Aussie against the strengthening dollar and inflationary pressure. In a move to ramp up its vaccination drive, Australia ordered 25 million Modena vaccines.
USD JPY Pair
The Japanese yen reversed a previous 0.65% growth to weaken by 0.69% against the dollar.
Japan posted a 6.2% jump in household spending, the highest in 18 months, reversing a previous 6.6% drop, and Impressively posted a 30.9% surge in export trade.
BOJ policymakers painted a gloomy economic outlook over the country’s economic recovery because of the coronavirus pandemic. In the week, the yen shed off 0.70% to settle at 109.367 against the dollar.
The bank kept monetary policy unchanged and hinted it would support the economy with massive stimulus. On Thursday, Japan imposed a state of emergency in 3 more districts hit hard by the coronavirus pandemic.
The latest declaration came as Japan buckled with more coronavirus infections just two-and-a-half weeks before the Tokyo Olympics. The coronavirus pandemic pushed the country’s health system to the brink, and its slow inoculation rate is not helping either.
Japan’s inoculation rate of 3% of the vaccinated population is the slowest among the g7 members. Moreover, its drug approval system significantly contributes to the slow inoculation drive.
NZDUSD Analysis
New Zealand posted mixed economic updates, which affected nzdusd analysis. For example, its electronic retail card expenditure grew by 4.0%, while food prices spiked by 1.1%. On the other hand, the business performance manufacturing index declined from 63.6 to 58.4.
By the end of the week, the kiwi dollar dropped by 0.38% to 0.7250.
Conclusion
Market optimism was a crucial driver in the latest news on forex market, pitying economic rebounds against inflationary pressure. Eventually, inflation pushed riskier assets to the red zone as the dollar bounced from the previous week’s loss.
Except for the euro, the American dollar won against all the g7 currencies.
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World Currency Market News from 17th to 23rd May 2021
