The U.S. dollar saw a moderate rise
The U.S. dollar mostly appreciated last week and peaked on Friday midday at the highest point since early April, despite widespread high-risk appetites and all-time highs in equity markets. Only on Friday afternoon, after the release of strong U.S. labor market data, the U.S. dollar adjusted and lost several days of growth.
U.S. economic data remained strong. The labor market has created 850,000 jobs in June and exceeded market expectations by 700,000. The unemployment rate fell to 5.9% and almost averaged 5.8% over the period since the end of World War II. The actual ISM manufacturing PMI was at 60.6 points and remained stable compared to last month’s data. The price component, meanwhile, was as high as 92.1 points and had peaked since 1979, suggesting that inflation is still not receding and price growth pressures remain. Despite a strong labor market and persistent inflation, the U.S. Federal Reserve maintains aggressive stimulus and continues to buy bonds, thus increasing liquidity and boosting government spending and deficits. The consumer confidence index stood at 127.3 points, the highest to pre-pandemic levels since February 2020. The number of new jobless claims fell from 410,000 to 360,000 a week.
The global corona virus situation deteriorated slightly, with the weekly average of new cases rising from 368,000 to 381,000 per day. Figures in the U.S. reflected the overall global trend and deteriorated slightly, with the weekly average of new cases rising moderately from 12,000 to 14,100d per day. The number of vaccinations injected in the country rose from 322 million to 329 million and the change was 7 million, stable compared to the previous week.
Overall, the number of people vaccinated with at least one dose in the U.S. rose from 53.9% to 54.7% of the population and increased by 0.8% over the week. Also, the Delta virus strain remains in the spotlight, which spreads much more easily among humans. In the U.K., this strain predominates among new infections, and despite about 66% of the population having received at least the first vaccination, the number of new cases has risen in the space of a few months from a few thousand a day to as many as 28,000 in the last days. It is gratifying that despite the high number of infections, there are very few deaths, which suggests that vaccines are effective.
The main currency pair EUR/USD reflected the trends of the U.S. dollar and briefly reached the level of 1,181 on Friday, but finally closed the week at 1,186. Among the economic data, preliminary annual inflation in June was 2.3% in Germany and 1.9% in Europe. German retail sales in May were -2.4% lower than in the same period a year ago. The European unemployment rate fell from 8.1% to 7.9%. European Producer Price Index showed 9.6% year-on-year growth, the highest since 1982. The EUR/USD pair closed the week with a depreciation of -0.6%.
The most important Asian pair, the USD/JPY, appreciated, but was volatile. Economic data included an annual rise in retail sales of 8.2% in May and growth in industrial production of 22%. USD/JPY ended the week appreciating 0.2%.
The British pound depreciated against the U.S. dollar to the level of 1,374, although part of the loss was recovered on Friday night and closed trading at 1,382 points. Among the economic data was the change in the country's economy in the first quarter, which amounted to -1.6% compared to the previous quarter. GBP/USD ended the week dropping -0.4%.
This week will start calmly, with investors waiting for actual service sector managers indexes on Monday and a U.S. non-working day. The German and European ZEW economic sentiment index, European retail sales data, is scheduled for Tuesday. The minutes of the last U.S. Federal Reserve meeting will be expected on Wednesday, and German international trade data on Thursday. Friday is relatively calm, with industrial output and international trade figures to be released in England.
According to Admiral Markets market sentiment data, 50% of investors have long positions in the EUR/USD pair (down -12 percentage points from last week’s data). In the main Asian pair USD/JPY, 40% of investors have long positions (up 4 percentage points). In the GBP/USD pair, 47% of participants expect a rise (down -14 percentage points). Such market data is interpreted as contraindicative, so GBP/USD and USD/JPY are expected to appreciate, and expectations in the EUR/USD pair are currently balanced. The analysis of positioning data needs to be combined with fundamental projections and technical analysis.
Sources: bloomberg.com, reuters.com, Admiral Markets MT4 Supreme Edition, investing.com
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