US dollar pushed through and appreciated

Last week the world’s reserve currency recovered some of last month’s losses, rebounding from the 200-day moving average on a daily chart. Financial markets were in a mildly corrective mood, with equity indices slightly reddening and bond yields rising, which probably contributed to the stronger demand for the US dollar in this context.

USD

US economic data were good, albeit limited. Much attention was drawn to the country’s Producer Price Index, which showed a rise of 8.3% year-on-year, a new high in the last decade. This suggests that upward price pressures are still not abating and that inflation rates are likely to remain higher for longer. The number of job openings in the country continued to rise and reached 10.93 million in the latest JOLTs data, the highest point in decades, indicating that the labour market is recovering faster than people are willing to return to work. The number of new jobless claims continued to fall from 0.340 million to 0.310 million on a weekly basis, suggesting a decline in the number of people claiming job loss assistance.

Virus data showed positive signs, with the global weekly average of new infections falling from 629 to 552 thousand per day. In the US, data supported the global trend, with the country’s weekly average of new cases decreasing from 162 to 135 thousand per day. The number of vaccines administered increased from 374 million to 379 million, a weekly change of 5 million. Overall, the number of people vaccinated with at least one dose in the US rose from 62.2% to 63.0% of the population, an increase of 0.8% per week. In Lithuania, the number of people vaccinated with at least one dose rose from 59.9% to 60.8%, a difference of 0.9%. In England, the number of cases increased slightly from 34 to 37 thousand per day.

Euro

The main currency pair EUR/USD depreciated to the level of 1.180, reflecting the trend of a stronger US dollar. Economic data on the Old Continent were good and preliminary data show that the economy grew by 14.3% year-on-year or 2.2% quarter-on-quarter in the second quarter. The ZEW economic sentiment index stood at 31.1 points in Europe and 26.5 points in Germany, both falling to their lowest level in over a year. The European Central Bank also kept interest rates and the size of its stimulus programme unchanged, but announced that they are likely to be cut at the end of the year or at the beginning of the next one, if market conditions permit. No specific figures or dates were provided. The EUR/USD pair ended the week down -0.6%.

JPY

The most important Asian pair USD/JPY continued its consolidation and moved around its 50-day moving average on the daily chart. The data included the actual economic growth in the second quarter, which amounted to 1.9% year-on-year or 0.5% quarter-on-quarter. The country’s household spending grew by 0.7% year-on-year. USD/JPY ended the week trading up 0.2%.

GBP

The British pound-US dollar pair consolidated in the trading ranges of the last few months. The data included an annual economic growth of 7.5% and a 3.8% year-on-year increase in industrial production. GBP/USD ended the week down -0.2%.

Economic Events

This week will start quietly and the Japanese Producer Price Index will be monitored on Monday. On Tuesday, investors will be looking forward to Japanese industrial production, English labour market data and US August inflation. On Wednesday, important Chinese industrial, inflation and retail sales indicators will be monitored, as well as English inflation and European and US industrial production data. On Thursday, the focus will be on the US retail sales figures, and on Friday on the English figure.

According to Admiral Markets market sentiment data, 65% of investors have long positions in the EUR/USD pair (up +37 percentage points compared to last week). In the main Asian pair USD/JPY, 49% of investors have long positions (down -6 percentage points). In GBP/USD, 40% of participants expect a rise (up +18 percentage points). Such market data is interpreted as a contrarian indicator, so EUR/USD is likely to fall, GBP/USD to rise, USD/JPY is in neutral. The analysis of positioning data should be combined with fundamental projections and technical analysis.

Source: bloomberg.com, reuters.com, Admiral Markets MT4 Supreme Edition, investing.com

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