Last week sentiment in the financial markets remained negative, which encouraged investors to choose safer currencies and the U.S. dollar has appreciated. Economic data from all main economies showed a slowdown of growth, and in Germany, a contraction of the economy was recorded.
In political news, Donald Trump has somewhat eased his stance on new import duties on Chinese goods, likely due to increased stock market volatility. Under the new plan, some of the goods will be subject to customs duties from the beginning of September and some by mid-December. Delayed goods include phones, computers, video equipment, toys and this political move is claimed to prevent inflation before Christmas when people buy presents.
U.S. economic data was ambiguous. The country's woes in the industrial sector were increasing, as the volume growth slowed to 0.5% per annum. Industry-related sectors, such as freight transport, have also shown declining sentiment. According to the Cass Transportation index, the need to transport goods has been falling for the eight consecutive month and has contracted compared with the last year. Sales of new trucks are virtually stopped, recording a drop of -80% compared to the same period last year. Meanwhile, the country's citizens are not so negative and continues to actively consume, which is very important as domestic consumption accounts for about 70% of the country's economy. In July, retail sales increased by 3.5% per annum. Annual inflation stood at 1.8% in July and accelerated from 1.6%.
Main currency pair EUR/USD recorded one of the worst performances among developed economies and felt below 1.11 level. This decline was prompted by comments from the European Central Bank on possible economic stimulus, which is likely to be announced at the September meeting. The news has made investors even more active in buying German bonds, which yields have fallen as low as -0.7%, an all-time low. Political problems in Italy have not diminished and market participants are waiting for a decision to hold early elections, which will bring additional uncertainty in the market. Among economic data in the old continent was Germany's ZEW index, which describes the country's economic expectations, and its value dropped to -44.1 points which was the lowest since 2011. According to preliminary data, the German economy stagnated compared to last year and contracted -0.1% quarter-on-quarter basis. Germany remains one of Europe's major troubles, as it is only a matter of time before the weaknesses of the biggest economy will pass on smaller countries that supply it with goods and services. EUR/USD has ended the trading week declining -1.0%.
Most important Asian pair USD/JPY almost reached 105-point level, which is the lowest point since March 2018, although it slightly rebounded afterwards. There were no important data announcements in Japan. USD/JPY has ended trading week appreciating 0.6%.
Despite a low risk appetite from investors, the British pound recorded an increase in value against the U.S. dollar. This was primarily determined by positive economic data from the country, which made investors to step back from short-selling the pound and close open positions. In political area, participants speculated about potential early Parliament's election, since existing Conservative Party position is not sufficient to get any approval for Brexit situation. Retail sales in England increased 3.3% per year, while inflation stepped higher to 2.1% level. GBP/USD finished trading week appreciating 1.0%.
This week will begin with international trade data from Japan, and later final Europe's inflation figures will be announced. On Tuesday and Wednesday there are no important announcements planned, although on Wednesday evening the U.S. Federal Reserve's last meeting minutes will be announced and investors will look for clues, how members are seeing monetary policy changes in upcoming months. On Thursday, investors will be watching preliminary manufacturing purchasing managers index results and will analyze European Central Bank meeting minutes. Also on Thursday Jackson Hole symposium will begin, which will bring together key central bank members which will give speeches. On Friday, the symposium will feature a speech by Jerome Powell, the head of the U.S. Federal Reserve, which could increase volatility in the markets.
According to Admiral Markets market sentiment data, EUR/USD long positions are held by 77% of investors (increased +27 percentage points, compared to last week's data). In the main Asian pair USD/JPY 59% of investors hold long positions (dropped -16 percentage points). In GBP/USD pair 73% of investors expect growth (dropped -6 percentage points). This kind of market data is interpreted as a controversial indicator, therefore depreciation is likely in EUR/USD, GBP/USD and USD/JPY pairs. Analysis of positioning data should always be accompanied by fundamental projections and technical analysis.
Sources: bloomberg.com, reuters.com, Admiral Markets MT4 Supreme Edition, investing.com
Discover the world's #1 multi-asset platform
Admiral Markets offers professional traders the ability to trade with a custom, upgraded version of MetaTrader 5, allowing you to experience trading at a significantly higher, more rewarding level. Experience benefits such as the addition of the Market Heat Map, so you can compare various currency pairs to see which ones might be lucrative investments, access real-time trading data, and so much more. Click the banner below to start your FREE download of MT5 Supreme Edition!
Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:
- This is a marketing communication. The analysis is published for informative purposes only and are in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
- Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
- Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
- To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
- Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.
- The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
- Any kind of previous or modeled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
- The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.