Negative fundamentals dominated the latest trade news in a volatile forex market to drive the g7 currencies’ performance. Traders reacted to the fundamentals forcing the currencies to reverse the previous week‘s performance. What caused the reversal in this busy week?
The Fundamentals
Economic data, oil prices, and coronavirus pandemics updates combined forces to drive the forex market.
COVID 19
According to CNN’s latest trade news, coronavirus resurgence continues to rise in many states in the U.S. In response to the resurgence, many countries like the U.K. are contemplating more stringent restriction measures.
On Friday, Trump, the U.S. president, announced that he and the first lady Melanie Trump both tested positivefor the infectious virus. As the president tested, positive global risk sentiments turned negative uplifting the haven currencies.
Brexit Talks
Brexit talks featured heavily in this week’s latest trade news. As the week progressed, the U.K. and the E.U. moved towards a compromising position sparking hopes for a deal.
The U.S. Politics
On the political scene, the ongoing presidential campaigns have an impact on the forex market. The poor presidential debate in the U.S., televised live on Wednesday, sparked risk aversion among forex traders. The messy debate caused significant changes in the forex market.
Economic Data
Many economies released financial reports which directly affected the performance of the g7 currencies. The commodity-related assets are heavily influenced by the global economic outlook and its trading partners.
On Monday, the global equity market increased, forcing investors to abandon the dollar in favor of the riskier markets.
Oil Prices
Over the week, oil prices dipped due to coronavirus fears, weak demand, and overproduction. Movement in the prices have a direct bearing on commodity-related assets. The oil prices dropped massively by 7.95% over the close of the week.
Fundamental Analysis and Economic Review of the G7 Currencies
Table: Performance summary of the g7 currencies
| Currency Pair | 28th September 2020 | 4th October 2020 | Average | Percentage Change | Remarks |
| USD | 94.302 | 93.909 | 93.965 | 0.816 | drop |
| GBP/USD | 1.2827 | 1.2940 | 1.2894 | 1.5300 | up |
| EUR/USD | 1.1664 | 1.1715 | 1.1717 | 0.7309 | up |
| USD/CHF | 0.9244 | 0.9209 | 0.9207 | 0.8078 | drop |
| USD/JPY | 105.49 | 105.29 | 105.45 | 0.29 | drop |
| USD/CAD | 1.3372 | 1.3303 | 1.3329 | 0.6089 | drop |
| AUD/USD | 0.7070 | 0.7166 | 0.7145 | 1.9781 | up |
| NZD/USD | 0.6552 | 0.6641 | 0.6612 | 1.5133 | up |
USD
In a busy week ending 4th October, the dollar reversed its previous week’s brilliant performance to close in red.. The Dollar Spot Index shed off 0.84% to settle lower at 93.844, having rallied by 1.85% previously.
A return of risk appetite weighed heavily on the greenback at the start of the week. The USA’s Presidential Debate, mid-week, was not sufficient to support the dollar. At the end of the week, global sentiments turned negative as America’s President, Donald Trump, tested positive, featured heavily in the usd dollar news.
More damage to the usd dollar news continued as traders reacted to the Progress towards a COVID-19 relief Bill. The U.S. economy shrunk to 31.4% in the 2nd quarter to seal the fate of the dollar. However, according to usd dollar news, a drop in the weekly jobless claims and improved consumer confidence was not enough to cushion the greenback.
The latest trade news also indicates that private companies generated 749K jobs, better than projections. Besides, the unemployment rate dropped from 8.4% to 7.9%. The figures, though positive, had a muted impact on the performance of the greenback.
Tuesday’s latest trade news elicited positive sentiments when the U.S. government unveiled a new stimulus package causing the dollar to underperform. The global equity market surge was damaging for the usd dollar news at the start of the week.
GBP/USD
The U.K. had a quiet week on the economic diary leaving the performance of the gbp usd currency news primarily to negative sentiments, financial updates, and Brexit talks.
Economic data posted mixed results with the GDP figure supporting the pound. A negative manufacturing index weighed heavily on it. The gbp usd currency news also highlighted a possible compromise on the Brexit talks ahead of Boris Johnson, and Ursula von der Leyen’s meeting proved to be vital for the sterling pound.
In the week ending 4th October, the pound rallied by 1.48% to close at 1.2935. According to gbp usd currency news, this was a reverse to the previous week’s increase of 1.32%.
On Monday, the sterling pound spiked in reaction to Bank of England sentiments. The BoE deputy governor Ramsden said that the bank would maintain interest rates above 0%.
EUR/USD
Another busy week on the economic diary in the Eurozone. Vital economic statistics included retail sales, unemployment figures, inflation, and manufacturing outputs; mixed results drove the euro to fluctuate. Upbeat retail sales and unemployment figures leveraged the euro.
Besides, manufacturing outputs on the upswing added more support to the eur usd. Hopes of a deal in the Brexit talk added support to the euro on Friday. The Eurozone’s inflation rates dropped from 0.4% to 0.2% while the consumer price increased by 0.1%. The threat of the coronavirus continues to cause havoc in many states of the E.U.
By the end of the week, EUR rose by 0.73% to close at 1.1716. In the prior week, it had fallen by 1.77%.
Somewhere In The Far East
According to yen news, Japan also had a busy week in the economic diary. Critical economic data in focus included retail sales, inflation, 3rd quarter Tanken report, inflation, and industrial production, all skewed to the positive.
Consumer prices and inflation figures dropped while Industrial production increased by 1.7%. The negative economic updates, coupled with positive latest trade news, worked intensely against the yen news.
The 3rd quarter Tankan reports painted a positive economic outlook for Japan. Over the week, the Yen increased by 0.27% to close 105.29 to the U.S. Dollar. Previously the Yen had weakened by 0.97%.
In the week, Trump tested positive for coronavirus, and the worst U.S. presidential debate ever supported the upside of the yen news.
USD/CHF
On a relatively quiet week, the Swiss franc’s performance was driven by counter currency flow and global risk sentiments. Retail trade increased by 1.6%, and stable consumer prices with a tense labor market also played a significant role.
On Wednesday, the central bank of Switzerland released a positive economic report that leveraged its currency. The bank maintained an expansionary monetary policy despite predicting its GDP to shrink by 5%.
On Friday, the Swiss franc responded and gained strength when Trump tweeted that he and his wife, the first lady, contracted coronavirus, adding more uncertainty to the upcoming presidential election in the U.S.
The Swiss franc fluctuated over the week but managed to increase by 0.8078% to close at 0.9207 against the dollar.
USD/CAD
Canada had a busy economic diary that primarily affected the performance of Lonnie. Mixed economic results did not provide proper direction for the Lonnie over the week. The economy expanded by a modest 3%. In the week ending 4th October, the Lonnie strengthened by 0.58%, closing at 1.3308 to reverse the previous week’s decline of 1.38%.
On Friday, the Lonnie moved downwards as the latest trade news turned negative in response to Trump and Melanie testing coronavirus positive. Weak Oil prices and counter currency flow were the leading causes of Lonnie’s underperformance as the latest trade news, and economic updates were mostly positive.
The Top Gainer
At aud usd latest news, a quiet economic week drove the performance of the Aussie. Negatively skewed economic data pulled down the Aussie but gained support from global risk appetite.
Aud usd latest news showed that the retail sales slid by 4% while Private sector credit remained constant. The manufacturing index dropped from 49.3 to 46.7, in reaction to lockdown measures in Victoria.
Despite the negative aud usd latest news updates from Australia, the Aussie emerged the week’s top gainer. In a bullish week run ending 4th October, the Aussie Dollar grew by 1.85% to close at 0.7161.
NZD/USD
The Kiwi Dollar closed the week stronger by 1.45% at 0.6641, on a quiet economic week. Improved business confidence, reduced employment rate, and increased investments proved crucial for the kiwi dollar uptick.
Furthermore, an improved economic outlook provided more support for the NewZealand dollar. However, the economic updates had an insignificant impact on the kiwi, leaving its performance to the latest trade news and counter currency flow.
Conclusion
In this week’s latest trade news update, the American dollar took a beating and sought refuge in the reds. It also lost against all other g7 currencies in a volatile market driven by oil, economic data, covid 19 pandemics, and U.S. politics.