Last week the world's reserve currency fell back to its lowest level since April 2018. Investors were actively selling the U.S. dollar when Jerome Powell said during a Jackson Hole symposium speech that the U.S. Federal Reserve is determined to allow inflation to rise above 2% to maintain a better labour market situation, which has a particularly positive impact on the lower and middle class. He also hinted that extremely low interest rates are likely to persist for at least a few more years.
Economic data in the U.S. varied. The country's consumer confidence index fell from 91.7 to 84.2 points in August, the lowest point since June 2014. Interestingly, market analysts expected a moderate rise to 93.0 points, but the reality of the economy whows a different picture.
As of today, there are a few key signs that the US econmoy is not doing very well in withstanding the pressures of the pandemic:
- The reality of the economy is forcing consumers to become more conservative, which in the coming months is likely to negatively affect consumption, which is the axis of the country's economy.
- Real estate market data estimates that as many as 6.9% of households with loans were in arrears for more than 30 days, and;
- The nominal number rose to 3.7 million, or about 100% higher than in the same period a year ago.
Meanwhile, the number of new jobless claims fell slightly from 1.1 to 1.0 million a week.
Coronavirus data have suggested a stabilization in the number of new cases worldwide. The U.S. average number of cases remained stable at 45,000 per day. Brazil also recorded stability at 45,000 a day. In India, the number of cases rose from 70 to 76 thousand, while in Russia it was about 4.7 thousand per day.
The main currency pair EUR/USD mainly reflected the sentiment of the U.S. dollar and ended the week rising to 1,190. There was not much relevant economic data. Investors are worried about the end of state stimulus programs, which have made it possible to ensure low levels of redundancies and maintain low unemployment. However, there is growing news that large businesses are planning to reduce the number of employees due to a significant drop in economic activity. Among the largest companies: Lufthansa about 22 thousand, carmaker Renault about 15 thousand, aircraft maker Airbus about 15 thousand, Nissan about 22 thousand, mainly after closing the plant in Spain, and many others in the transport, retail and accommodation sectors. EUR/USD pair closed the week depreciating -0.4%.
The major Asian pair USD/JPY consolidated around the 106.0 level. No relevant economic data was published in the country. USD/JPY ended the week depreciating -0.4%.
The British pound jumped to 1,335-point level against the U.S. dollar. No economic data was published. In the UK, there were also reports of plans to reduce the number of employees - British Petroleum plans to lay off about 10 thousand, Marks&Spencer retailer about 7 thousand. GBP/USD has ended the trading week appreciating 2.0%.
This week will start in July with data from Japanese and South Korean industry volumes. The change in South Korean exports in August and the purchase indices of industrial managers in major economies are expected on Tuesday. German labour market and retail trade data and European preliminary inflation in August will also be monitored. No major news is scheduled on Wednesday, European retail data will be released on Thursday, and everyone will be monitoring U.S. labour market indicators on Friday.
According to Admiral Markets market sentiment data, 22% of investors have long positions in the EUR/USD pair (down -21 percentage points from last week). In the main Asian pair USD/JPY, 55% of investors have long positions (up +2 percentage points). In the GBP/USD pair, 20% of participants expect a rise (down -20 percentage points). Such market data is interpreted as contraindicative, therefore EUR/USD and GBP/USD pairs are expected to rise and USD/JPY to depreciate. 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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